This paper analyzes the behavior of the CBOT seat prices for the post-1975 period. Based on the
time-series property of seat returns and the empirical link between seat returns and economic
factors, we develop a conditional multi-factor model, where the price of risks are assumed to be
linearly generated from the ARIMA estimates of the factor values. Particularly, we find the close
short-run and long-run link between the CBOT seat price and CBOT trading volume. Importantly,
the CBOT seat returns appear to exhibit significant power in predicting stock market returns, the
growth of CBOT trading volume, the growth of industrial production, and interest rate. Based on the
dynamic pricing model including three factors by Fama and French, we find that excess seat returns
are time-varying with some expected factor variables, such as expected size premium ( SMBe ),
expected CBOT trading volume (VOLe ), and expected interest rate ( INT e ). Seat returns are
particularly sensitive to the size premium shock ( SMBu ). We conclude that the pricing mechanism
of CBOT seats is similar to that of a well-diversified stock market portfolio.
Keywords: CBOT Seat Return, CBOT Trading Volume, Time-Varying Expected Return,
Conditional Multi-factor Model. ARIMA
