Point me in the right direction

#1
Hi there,

I am currently trying to determine the relationship between a spot price and a contract price. My spot price is obviously moving sporadically whereas the contract price does not vary over each quarter. Can I use regression analysis over each quarter even if the contract price does not change over the quarter? or do you need to have two changing variables to employ regression analysis?

Essentially I want to be able to predict a band within which the spot price will sit in the future given the contract price? Am I on the right track using regression analysis? or can you suggest how I would do this?

Thanks
 

CB

Super Moderator
#2
or do you need to have two changing variables to employ regression analysis?
You do (if it doesn't vary, it's not a variable). The other issue here is that you've got time series data, which makes things a good deal more complex (e.g. probably presence of autocorrelated errors) - simple least-squares regression may not be an appropriate technique even with two genuine continuous variables.