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Market Efficiency of Oil Spot and Futures: A Stochastic Dominance Approach

  • Hooi Hooi Lean

    (School of Social Sciences, Universiti Sains Malaysia)

  • Michael McAleer

    (Erasmus School of Economics, Erasmus University Rotterdam and Tinbergen Institute)

  • Wing-Keung Wong

    (Department of Economics, Hong Kong Baptist University)

This paper examines the market efficiency of oil spot and futures prices by using a stochastic dominance (SD) approach. As there is no evidence of an SD relationship between oil spot and futures, we conclude that there is no arbitrage opportunity between these two markets, and that both market efficiency and market rationality are not rejected in the oil spot and futures markets.

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File URL: http://www.carf.e.u-tokyo.ac.jp/pdf/workingpaper/fseries/210.pdf
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Paper provided by Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo in its series CARF F-Series with number CARF-F-201.

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Length: 32 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:cfi:fseres:cf201
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