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Testing Efficiency Of The Copper Futures Market: New Evidence From London Metal Exchange

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Author Info
Dimitris Kenourgios (Athens University of economics & Business)
Aristeidis Samitas (University of Aegean)

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Abstract

This paper investigates the joint hypothesis of market efficiency and unbiasedness of futures prices for the copper futures contract traded on the London Metal Exchange. This contract is of particular importance given the usage and properties of the underlying commodity and its highest share of trading during the last decade, in an exchange which is the centre of the world’s trading in copper. The data contain prices from two different copper futures contracts (three and fifteen months maturity) covering the decade of 1990s, a very volatile and turbulent period for the copper market worldwide. Unlike previous studies, it tests for both long-run and short-run efficiency using cointegration and error correction model. Our results show that the market is not efficient and do not provide unbiased estimates of future copper spot prices, which has important implications for the users of this market.

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Paper provided by EconWPA in its series Finance with number 0512010.

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Length: 18 pages
Date of creation: 09 Dec 2005
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Handle: RePEc:wpa:wuwpfi:0512010

Note: Type of Document - pdf; pages: 18
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Web page: http://129.3.20.41

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Related research
Keywords: Copper Futures Market Market Efficiency Unbiasedness Hypothesis London Metal Exchange

Find related papers by JEL classification:
C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Hypothesis Testing
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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    Other versions:
  2. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June. [Downloadable!] (restricted)
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  11. Liu, Peter C. & Maddala, G. S., 1992. "Rationality of survey data and tests for market efficiency in the foreign exchange markets," Journal of International Money and Finance, Elsevier, vol. 11(4), pages 366-381, August. [Downloadable!] (restricted)
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  16. Moore, Michael J & Cullen, Ursula, 1995. "Speculative Efficiency on the London Metal Exchange," The Manchester School of Economic & Social Studies, Blackwell Publishing, vol. 63(3), pages 235-56, September.
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