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Are commodity futures markets short-term efficient? An empirical investigation

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  • Mazouz, Khelifa
  • Wang, Jian

Abstract

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.

Suggested Citation

  • Mazouz, Khelifa & Wang, Jian, 2014. "Are commodity futures markets short-term efficient? An empirical investigation," 88th Annual Conference, April 9-11, 2014, AgroParisTech, Paris, France 169763, Agricultural Economics Society.
  • Handle: RePEc:ags:aesc14:169763
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    File URL: http://purl.umn.edu/169763
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    References listed on IDEAS

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    Keywords

    Commodity price behaviour; market efficiency; underreaction; overreaction; Demand and Price Analysis; Marketing; Risk and Uncertainty; C13; C22; G14;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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