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Spot and futures commodity markets and the unbiasedness hypothesis - evidence from a novel panel unit root test

  • Robert Czudaj


    (University of Duisburg-Essen; FOM Hochschule für Oekonomie & Management)

  • Joscha Beckmann


    (University of Duisburg-Essen)

A controversial view of the evolution of commodity markets is that the engagement of speculative capital arguably introduces volatility and price movements unrelated to changes in traditional demand and supply factors. Thus, the efficiency of spot and futures markets is an important topic in this context, as the price of a futures contract in the current period should be an unbiased estimator of next period´s spot price under the joint assumption of risk neutrality and rationality. In this vein, the present study contributes to the literature by applying the novel panel unit root test provided by Demetrescu and Hanck (2012) which simultaneously allows for cross-sectional dependence and unconditional heteroskedasticity. Our findings show that most spot and futures markets for commodities were efficient until the turn of the millennium, but appear to be inefficient thereafter owing to an increase in volatility, which might be attributed to the intense engagement of speculation in commodity markets.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 32 (2012)
Issue (Month): 2 ()
Pages: 1695-1707

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Handle: RePEc:ebl:ecbull:eb-12-00122
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  1. Cifarelli, Giulio & Paladino, Giovanna, 2010. "Oil price dynamics and speculation: A multivariate financial approach," Energy Economics, Elsevier, vol. 32(2), pages 363-372, March.
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  7. Joseph V. Balagtas & Matthew T. Holt, 2009. "The Commodity Terms of Trade, Unit Roots, and Nonlinear Alternatives: A Smooth Transition Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 87-105.
  8. M. J. Lombardi & I. Van Robays, 2011. "Do Financial Investors Destabilize the Oil Price?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/760, Ghent University, Faculty of Economics and Business Administration.
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