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Efficiency Tests Of Futures Markets For Uk Agricultural Commodities

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  • A. J. Aulton
  • C. T. Ennew
  • A. J. Rayner

Abstract

An efficient futures market should provide a forecast of the future spot price which reflects all publicly available information; ideally, for effective price discovery such forecasts would also be unbiased. Evidence for market efficiency, much of which is US based, is mixed and despite its importance from both public and private perspectives, there are relatively few studies of futures market efficiency in relation to UK agricultural commodities. This paper presents the results of a study of market efficiency in relation to three distinct UK futures markets using a cointegration methodology. The results provide evidence of efficiency and unbiasedness in relation to wheat, some concerns with respect to efficiency in relation to potatoes and pigmeat and some concerns about bias in relation to potatoes.

Suggested Citation

  • A. J. Aulton & C. T. Ennew & A. J. Rayner, 1997. "Efficiency Tests Of Futures Markets For Uk Agricultural Commodities," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1‐3), pages 408-424, January.
    • Handle: RePEc:bla:jageco:v:48:y:1997:i:1-3:p:408-424
    DOI: 10.1111/j.1477-9552.1997.tb01162.x
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    Cited by:

    1. Rahul Kumar Singh, 2023. "Efficiency of Wheat Futures across APMC Mandis," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 21(3), pages 681-701, September.
    2. Mohanty, Sunil K. & Mishra, Sibanjan, 2020. "Regulatory reform and market efficiency: The case of Indian agricultural commodity futures markets," Research in International Business and Finance, Elsevier, vol. 52(C).
    3. Luo, Jiawen & Klein, Tony & Ji, Qiang & Hou, Chenghan, 2022. "Forecasting realized volatility of agricultural commodity futures with infinite Hidden Markov HAR models," International Journal of Forecasting, Elsevier, vol. 38(1), pages 51-73.
    4. H. Holly Wang & Bingfan Ke, 2005. "Efficiency tests of agricultural commodity futures markets in China," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(2), pages 125-141, June.
    5. Górska, Anna & Krawiec, Monika, 2017. "Analiza efektywności informacyjnej w formie słabej na rynkach „soft commodities” z wykorzystaniem wybranych testów statystycznych," Problems of World Agriculture / Problemy Rolnictwa Światowego, Warsaw University of Life Sciences, vol. 17(32, Part ), September.
    6. Sibanjan Mishra, 2019. "Testing Martingale Hypothesis Using Variance Ratio Tests: Evidence from High-frequency Data of NCDEX Soya Bean Futures," Global Business Review, International Management Institute, vol. 20(6), pages 1407-1422, December.
    7. Bhabani Sankar Rout & Nupur Moni Das & K. Chandrasekhara Rao, 2021. "Functional Effectiveness of Commodity Futures Market: A Comparative Assessment of Agricultural and Metal Commodities," Paradigm, , vol. 25(1), pages 42-60, June.
    8. Narinder Pal Singh & Archana Singh, 2017. "Empirical Investigation on Food Inflation and Efficiency Issues in Indian Agri-futures Market," Emerging Economy Studies, International Management Institute, vol. 3(2), pages 156-165, November.
    9. Guo, Zhibo & White, Ben & Mugera, Amin, 2013. "Hedge Effectiveness for Western Australia Crops," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152154, Australian Agricultural and Resource Economics Society.
    10. C. W. Morgan, 1999. "Futures Markets and Spot Price Volatility: A Case Study," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(2), pages 247-257, May.
    11. Algieri, Bernardina & Kalkuhl, Matthias, 2014. "Back to the Futures: An Assessment of Commodity Market Efficiency and Forecast Error Drivers," Discussion Papers 187159, University of Bonn, Center for Development Research (ZEF).
    12. Zhuo Chen & Bo Yan & Hanwen Kang & Liyu Liu, 2023. "Asymmetric price adjustment and price discovery in spot and futures markets of agricultural commodities," Review of Economic Design, Springer;Society for Economic Design, vol. 27(1), pages 139-162, February.
    13. P. J. Dawson & A. L. Tiffin & B. White, 2000. "Optimal Hedging Ratios for Wheat and Barley at the LIFFE: A GARCH Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 51(2), pages 147-161, May.
    14. Chhabra, Damini & Gupta, Mohit, 2020. "Market efficiency and calendar anomalies in commodity futures markets: a review," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 33(2), December.
    15. Julio C. Alonso & Andrés M. Arcila, 2014. "Eficiencia semifuerte del mercado internacional del azúcar entre los anos 2001 y 2011," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, June.
    16. Li, Jia & Hanrahan, Kevin F. & McErlean, Seamus, 2004. "The Efficiency Of The Futures Market For Agricultural Commodities In The Uk," 2004 Annual meeting, August 1-4, Denver, CO 20203, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Nordier, Jean-Pierre, 2021. "Identifying possible misspecification in South African soybean oil future contracts," Research Theses 334756, Collaborative Masters Program in Agricultural and Applied Economics.
    18. Xiaokang Hou & Shah Fahad & Peipei Zhao & Beibei Yan & Tianjun Liu, 2022. "The Trilogy of the Chinese Apple Futures Market: Price Discovery, Risk-Hedging and Cointegration," Sustainability, MDPI, vol. 14(19), pages 1-16, October.
    19. Bernardina Algieri & Matthias Kalkuhl, 2019. "Efficiency and Forecast Performance of Commodity Futures Markets," American Journal of Economics and Business Administration, Science Publications, vol. 11(1), pages 19-34, June.
    20. Fizaine, Florian, 2015. "Minor metals and organized markets: News highlights about the consequences of establishing a futures market in a thin market with a dual trading price system," Resources Policy, Elsevier, vol. 46(P2), pages 59-70.
    21. Mashamaite, P. & Moholwa, B., 2005. "Price asymmetry in South African futures markets for agricultural commodities," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 44(3), pages 1-11, September.
    22. Wiseman, J.A. & Darroch, M.A.G. & Ortmann, G.F., 1999. "Testing The Efficiency Of The South African Futures Market For White Maize," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 38(3).
    23. Phukubje, M.P. & Moholwa, Motlatjo B., 2006. "Testing for weak-form efficiency in South African futures market for wheat and sunflower seeds," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 45(2), pages 1-16, June.

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