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Price asymmetry in South African futures markets for agricultural commodities

  • Mashamaite, P.
  • Moholwa, B.
Registered author(s):

    This paper tests the existence of price asymmetry in South African futures markets for white and yellow maize, wheat and sunflower seeds using a dynamic price asymmetry model. The sum of coefficients test and the speed of adjustment test are used to determine whether or not prices move up in the same fashion as they move down, over daily and weekly data frequencies. Out of the four commodity futures markets studied over varying data frequencies, only daily wheat is price asymmetric. Wheat daily prices respond faster to price decreases than to price increases. The implication of the results is that past prices do affect current prices and contain information. Hence, the weak-form efficient market hypothesis appears to be contradicted for wheat futures market. Another important implication of the results is that implementing policies accounting for asymmetric behavior through price limit and margin policies will improve the functioning and stability of wheat futures market in South Africa.

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    File URL: http://purl.umn.edu/31722
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    Article provided by Agricultural Economics Association of South Africa (AEASA) in its journal Agrekon.

    Volume (Year): 44 (2005)
    Issue (Month): 3 (September)
    Pages:

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    Handle: RePEc:ags:agreko:31722
    Contact details of provider: Web page: http://www.aeasa.org.za/
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    1. Smidt, Seymour, 1968. "A New Look at the Random Walk Hypothesis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 3(03), pages 235-261, September.
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    5. Baillie, Richard T & Myers, Robert J, 1991. "Bivariate GARCH Estimation of the Optimal Commodity Futures Hedge," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(2), pages 109-24, April-Jun.
    6. Bailey, DeeVon & Brorsen, B. Wade, 1989. "Price Asymmetry In Spatial Fed Cattle Markets," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(02), December.
    7. Townsend, Rob F., 1998. "Econometric Methodology Ii : Strengthening Time Series Analysis," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 37(1), March.
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