Department of Economics

Using retail commodity prices, most research finds positive Border Effects and rejects effective arbitrage and the Law of One Price. On the other hand, using auction prices, the finance literature and a few articles using commodities support effective arbitrage and the LOP. Using longer intervals and a wider variety of commodity auction prices than ever before, I find strong support for effective arbitrage and the LOP. In addition, for the first time, I use auction prices to look for Border Effects. Both half lives and standard deviations reject positive Border Effects.