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Is The Thinly-Traded Butter Futures Contract Priced Efficiently?

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  • Tondel, Fabien
  • Maynard, Leigh J.

Abstract

After over eight years of trading, the Chicago Mercantile Exchange butter futures contract remains thinly traded, possibly impeding price discovery. Pricing efficiency was assessed using cointegration techniques and error correction models. Results suggest that market efficiency could not be rejected up to a two-month forecast horizon. Illiquid markets reduce hedging performance, which in turn discourage liquidity growth.

Suggested Citation

  • Tondel, Fabien & Maynard, Leigh J., 2004. "Is The Thinly-Traded Butter Futures Contract Priced Efficiently?," 2004 Annual Meeting, February 14-18, 2004, Tulsa, Oklahoma 34684, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saeaft:34684
    DOI: 10.22004/ag.econ.34684
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    References listed on IDEAS

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