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Market efficiency in agricultural futures markets

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  • Andrew McKenzie
  • Matthew Holt

Abstract

Market efficiency and unbiasedness are tested in four agricultural commodity futures markets - live cattle, hogs, corn, and soybean meal - using cointegration and error correction models with GQARCH-in-mean processes. Results indicate each market is unbiased in the long run, although cattle, hogs and corn futures markets exhibit short-run inefficiencies and pricing biases. Models for cattle and corn outperform futures prices in out-of-sample forecasting. Results also suggest short-run time-varying risk premiums in cattle and hog futures markets.

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Bibliographic Info

Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 34 (2002)
Issue (Month): 12 ()
Pages: 1519-1532

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Handle: RePEc:taf:applec:v:34:y:2002:i:12:p:1519-1532

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Citations

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Cited by:
  1. Wang, H. Holly & Ke, Bingfan, 2003. "Is China'S Agricultural Futures Market Efficient?," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25806, International Association of Agricultural Economists.
  2. Schnake, Kristin N. & Karali, Berna & Dorfman, Jeffrey H., 2012. "The Informational Content of Distant-Delivery Futures Contracts," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(2), August.
  3. Jabir Ali & Kriti Bardhan Gupta, 2011. "Efficiency in agricultural commodity futures markets in India: Evidence from cointegration and causality tests," Agricultural Finance Review, Emerald Group Publishing, vol. 71(2), pages 162-178, July.
  4. Wang, H. Holly & Ke, Bingfan, 2005. "Efficiency tests of agricultural commodity futures markets in China," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(2), June.
  5. Tarun Soni, 2013. "Testing Efficiency of Guar seed Futures: Empirical Evidence from India," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 16(47), pages 211-228, March.
  6. Armah, Stephen E., 2008. "Establishing the Presence of a Risk Premium in the Cocoa Futures Market: An Econometric Analysis," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6778, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Carcano, G. & Falbo, P. & Stefani, S., 2005. "Speculative trading in mean reverting markets," European Journal of Operational Research, Elsevier, vol. 163(1), pages 132-144, May.
  8. Ramaprasad Bhar & Shigeyuki Hamori, 2006. "Component structures of agricultural commodity futures traded on the Tokyo Grain Exchange," Asia-Pacific Financial Markets, Springer, vol. 13(1), pages 1-9, March.
  9. Sanders, Dwight R. & Manfredo, Mark R., 2005. "A Test of Forecast Consistency Using USDA Livestock Price Forecasts," 2005 Conference, April 18-19, 2005, St. Louis, Missouri 19042, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

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