Are commodity futures markets short-term efficient? An empirical investigation
This study examines individual commodity futures price reaction to large one day price changes, or "shocks". The mean-adjusted abnormal return model suggests that investors in 6 of the 18 commodity futures, examined in this study, either underreact or overreact to positive surprises. It also detects underreaction patterns in 8 commodity future prices following negative surprises. However, after conducting appropriate systematic risk and conditional heteroskedasticity adjustments, we show that almost all commodity futures react efficiently to shocks.
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