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The pricing efficiency of crude oil futures in the Shanghai International Exchange

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  • Yang, Chen
  • Lv, Fei
  • Fang, Libing
  • Shang, Xingxing

Abstract

We investigate the pricing efficiency of the newly emerged crude oil futures market of the Shanghai International Exchange (INE) from the perspective of cointegration and Granger causality between the returns on INE crude oil futures and some representative spot markets. With a limited sample period, we employ a series of robust statistics and find that the INE crude oil futures’ returns have an equilibrium relationship with the spot returns on the Daqing, Shengli, Oman, WTI, and Brent spot markets. Both imply that the INE crude oil futures price can reflect the fundamental information of spot markets effectively. The evidence of Granger causality is mixed but supports the efficiency of the INE in the Asia-Pacific region.

Suggested Citation

  • Yang, Chen & Lv, Fei & Fang, Libing & Shang, Xingxing, 2020. "The pricing efficiency of crude oil futures in the Shanghai International Exchange," Finance Research Letters, Elsevier, vol. 36(C).
    • Handle: RePEc:eee:finlet:v:36:y:2020:i:c:s1544612319305598
    DOI: 10.1016/j.frl.2019.101329
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    Cited by:

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    9. Alaba, Oluwayemisi O. & Ojo, Oluwadare O. & Yaya, OlaOluwa S & Abu, Nurudeen & Ajobo, Saheed A., 2021. "Comparative Analysis of Market Efficiency and Volatility of Energy Prices Before and During COVID-19 Pandemic Periods," MPRA Paper 109825, University Library of Munich, Germany.
    10. Junshu Jiang & Jordan Richards & Raphael Huser & David Bolin, 2024. "The Efficient Tail Hypothesis: An Extreme Value Perspective on Market Efficiency," Papers 2408.06661, arXiv.org.
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    17. Yang, Kun & Wei, Yu & Li, Shouwei & Liu, Liang & Wang, Lei, 2021. "Global financial uncertainties and China’s crude oil futures market: Evidence from interday and intraday price dynamics," Energy Economics, Elsevier, vol. 96(C).
    18. Duan, Kun & Ren, Xiaohang & Wen, Fenghua & Chen, Jinyu, 2023. "Evolution of the information transmission between Chinese and international oil markets: A quantile-based framework," Journal of Commodity Markets, Elsevier, vol. 29(C).
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    20. Shao Ying-Hui & Liu Ying-Lin & Yang Yan-Hong, 2022. "The short-term effect of COVID-19 pandemic on China's crude oil futures market: A study based on multifractal analysis," Papers 2204.05199, arXiv.org.

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    More about this item

    Keywords

    Pricing efficiency; Crude oil market; Granger causality; Cointegration;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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