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Is the Australian wool futures market efficient as a predictor of spot prices?


  • Jeremy Graham‐Higgs
  • Alicia Rambaldi
  • Brian Davidson


Giles and Goss (1980) have suggested that, if a futures market provides a forward pricing function, then it is an efficient market. In this article a simple test for whether the Australian Wool Futures market is efficient is proposed. The test is based on applying cointegration techniques to test the Law of One Price over a three, six, nine, and twelve month spread of futures prices. We found that the futures market is efficient for up to a six‐month spread, but no further into the future. Because futures market prices can be used to predict spot prices up to six months in advance, woolgrowers can use the futures price to assess when they market their clip, but not for longer‐term production planning decisions. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 565–582, 1999

Suggested Citation

  • Jeremy Graham‐Higgs & Alicia Rambaldi & Brian Davidson, 1999. "Is the Australian wool futures market efficient as a predictor of spot prices?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 19(5), pages 565-582, August.
  • Handle: RePEc:wly:jfutmk:v:19:y:1999:i:5:p:565-582

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    1. Sepideh Dolatabadi & Paresh Kumar Narayan & Morten Ørregaard Nielsen & Ke Xu, 2018. "Economic significance of commodity return forecasts from the fractionally cointegrated VAR model," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(2), pages 219-242, February.

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