Testing Market Equilibrium: Is Cointegration Informative?
Cointegration methods are increasingly used to test for market efficiency and integration. The economic rationale for these tests, however, is generally unclear. Using a simple spatial equilibrium model to simulate equilibrium price behavior, it is shown that prices in a well-integrated, efficient market need not be cointegrated. Furthermore, the number of cointegrating relationships among prices is not a good indicator of the degree to which a market is integrated.
Volume (Year): 22 (1997)
Issue (Month): 02 (December)
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- Hall, Anthony D & Anderson, Heather M & Granger, Clive W J, 1992. "A Cointegration Analysis of Treasury Bill Yields," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 116-26, February.
- Benson, B.L. & Faminow, M.D. & Marquis, M.H. & Sauer, D.G., 1992. "The Impact of Provincial Marketing Boards on Pricing Dynamics in the North American Slaughter Hog Market," Working Papers 1992_12_2, Department of Economics, Florida State University.
- Param Silvapulle & Sisira Jayasuriya, 1994. "Testing For Philippines Rice Market Integration: A Multiple Cointegration Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 45(3), pages 369-380.
- Corbae, Dean & Lim, Kian-Guan & Ouliaris, Sam, 1992. "On Cointegration and Tests of Forward Market Unbiasedness," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 728-32, November.
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