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Economic Significance of the Predictable Movements in Futures Returns

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  • Joelle Miffre

Abstract

type="main" xml:lang="en"> This paper tests whether the variation in expected futures returns reflects rational pricing in an efficient market or weak-form market inefficiency. The issue is investigated by looking at the abnormal performance of a trading rule based on available information. Once one allows for time-varying risk and time-varying risk premia, the investment strategy can be used consistently to generate abnormal returns in seven out of 26 markets. With relatively few exceptions therefore, the predictable movements in futures returns reflect weak-form market efficiency. The paper also shows that wrongly assuming constant expected returns may lead to incorrect inferences regarding market efficiency. (J.E.L.: G14, G12).

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  • Joelle Miffre, 2002. "Economic Significance of the Predictable Movements in Futures Returns," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 31(1), pages 125-142, February.
    • Handle: RePEc:bla:ecnote:v:31:y:2002:i:1:p:125-142
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    File URL: http://hdl.handle.net/10.1111/1468-0300.00075
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    Cited by:

    1. Konstantinidi, Eirini & Skiadopoulos, George, 2011. "Are VIX futures prices predictable? An empirical investigation," International Journal of Forecasting, Elsevier, vol. 27(2), pages 543-560, April.
    2. Raushan Kumar, 2021. "Predicting Wheat Futures Prices in India," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(1), pages 121-140, March.

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