Economic Research and Perspectives

Economic Research and Perspectives

The Effect of Maturity in Gold Coin Futures Contracts Traded in Iran Mercantile Exchange (IME)

Authors
Akbar Mirzapour Babajan 1
Javid Bahrami 2
1 Assistant Professor of Economics, Faculty of Management and Accounting, Qazvin Islamic Azad University, Qazvin, Iran,
2 Assistant Professor of Economics, Allameh Tabataba'i University, Tehran, Iran
Abstract
In this article, we examine Samuelson's hypothesis on maturity effect in gold coin futures contracts traded in Iran Mercantile Exchange (IME). According to this hypothesis, the volatility of futures prices increases as future contracts approaches expiration date. The results show that the maturity effect is so weak in future contracts under investigation. This effect is acceptable in 5 out of 29 contracts. These contracts have been traded from 25 November 2008 to 21 September 2012. There are two different hypotheses on maturity effect in future contracts; the state variable hypothesis and negative covariance hypothesis. The state variable hypothesis states that the variability of futures prices is systematically higher in those periods when relatively large amounts of supply and demand uncertainty are resolved, i.e., during periods in which the resolution of uncertainty is high. According to negative covariance hypothesis, maturity effect is more likely to hold in markets that exhibit negative covariance between changes in spot prices and changes in net carry costs. Using panel data and Ordinary Least Square (OLS) techniques, we conclude that no hypothesis is held for IME gold coin futures contracts.
Keywords
Maturity Effect
Samuelson's hypostasis
Negative covariance hypothesis
Information Flow Effect
Futures contract
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Economic Research and Perspectives
Volume 15, Issue 1
Spring 2015
Pages 55-79