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Speculative Efficiency on the London Metal Exchange

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  • Moore, Michael J
  • Cullen, Ursula

Abstract

This paper examines the proposition that forward rates are unbiased predictors of future spot rates for base metal prices on the London Metal Exchange. The analysis is complicated by the fact that the data are sampled more frequently than the life of the forward contracts. Though the implications of this for stationary inference are well known, it has not yet been addressed within the context of unit root econometrics. This is explored and an estimation and testing strategy is proposed. The results are surprisingly favorable to the unbiasedness proposition. Copyright 1995 by Blackwell Publishers Ltd and The Victoria University of Manchester

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Bibliographic Info

Article provided by University of Manchester in its journal The Manchester School of Economic & Social Studies.

Volume (Year): 63 (1995)
Issue (Month): 3 (September)
Pages: 235-56

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Handle: RePEc:bla:manch2:v:63:y:1995:i:3:p:235-56

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Cited by:
  1. Maria St├╝ckler, 2002. "Handel auf Terminkontraktm├Ąrkten," Department of Economics Working Papers wuwp080, Vienna University of Economics, Department of Economics.
  2. Manolis Kavussanos & Ilias Visvikis & David Menachof, 2005. "The Unbiasedness Hypothesis in the Freight Forward Market: Evidence from Cointegration Tests," Review of Derivatives Research, Springer, vol. 7(3), pages 241-266, October.
  3. Heaney, Richard, 2002. "Does knowledge of the cost of carry model improve commodity futures price forecasting ability?: A case study using the London Metal Exchange lead contract," International Journal of Forecasting, Elsevier, vol. 18(1), pages 45-65.
  4. Triantafyllopoulos, Kostas, 2006. "Multivariate discount weighted regression and local level models," Computational Statistics & Data Analysis, Elsevier, vol. 50(12), pages 3702-3720, August.
  5. Jean-Thomas Bernard & Lynda Khalaf & Maral Kichian & Sebastien Mcmahon, 2008. "Forecasting commodity prices: GARCH, jumps, and mean reversion," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 27(4), pages 279-291.
  6. Clinton Watkins & Michael McAleer, 2003. "Pricing of Non-ferrous Metals Futures on the London Metal Exchange," CIRJE F-Series CIRJE-F-213, CIRJE, Faculty of Economics, University of Tokyo.
  7. Dimitris Kenourgios & Aristeidis Samitas, 2005. "Testing Efficiency Of The Copper Futures Market: New Evidence From London Metal Exchange," Finance 0512010, EconWPA.
  8. Moore, Michael J. & Copeland, Laurence S., 1995. "A comparison of Johansen and Phillips-Hansen cointegration tests of forward market efficiency Baillie and Bollerslev revisited," Economics Letters, Elsevier, vol. 47(2), pages 131-135, February.
  9. An-Sing Chen & James Wuh Lin, 2004. "Cointegration and detectable linear and nonlinear causality: analysis using the London Metal Exchange lead contract," Applied Economics, Taylor & Francis Journals, vol. 36(11), pages 1157-1167.

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