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Market Efficiency of Oil Spot and Futures: A Stochastic Dominance Approach

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  • Lean, H.H.
  • McAleer, M.J.
  • Wong, W.K.

Abstract

This paper examines the market efficiency of oil spot and futures prices by using a stochastic dominance (SD) approach. As there is no evidence of an SD relationship between oil spot and futures, we conclude that there is no arbitrage opportunity between these two markets, and that both market efficiency and market rationality are not rejected in the oil spot and futures markets.

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Bibliographic Info

Paper provided by Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute in its series Econometric Institute Research Papers with number EI 2010-11.

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Date of creation: 08 Feb 2010
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Handle: RePEc:ems:eureir:18038

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Keywords: futures market; risk averter; risk seeker; spot market; stochastic dominance;

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Cited by:
  1. Broll, Udo & Wong, Wing-Keung & Wu, Mojia, 2013. "Banking Firm and Two-Moment Decision Making," MPRA Paper 51687, University Library of Munich, Germany.
  2. Guorui Bian & Michael McAleer & Wing-Keung Wong, 2013. "Robust Estimation and Forecasting of the Capital Asset Pricing Model," Tinbergen Institute Discussion Papers 13-036/III, Tinbergen Institute.
  3. Lean, H.H. & McAleer, M.J. & Wong, W-K., 2013. "Risk-averse and Risk-seeking Investor Preferences for Oil Spot and Futures," Econometric Institute Research Papers EI 2013-27, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.

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