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noneWang, Chung-wei 24 June 2008 (has links)
In the purpose of this study we examine the long run relationship between the flower wholesale markets in Taiwan
by the theory of Park (2007). The market integration is analyzed from the viewpoint of the Law of One Price (LOP).
The LOP means that the products flow from the lower price markets to the higher price ones without transaction cost
utill everywhere have the same price. However, in a situation that the transaction cost exists, the assumption of LOP is
questionable. When the price difference between two markets exceeds the transaction cost, there is an arbitrage opportunity.
This study examine the relationship between the flower wholesale markets in Taiwan by threshold cointegration theory.
The result is that there indeed exists long run relationship and threshold effects. In addition, we consider a time-varing threshold
cointegration model in Park (2007), to see whether there are different arbitrage behavious depending on the season between
the flower wholesale markets. Finally, we have a result that the same price gap between markets in different season will be
in different regime because of the change of the value of threshold. And it causes the seasonal arbitrage behavious.
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