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Considering an Informational Role for a Futures Market

Author

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  • Pamela P. Brannen
  • Edwin F. Ulveling

Abstract

This study compares how well current spot prices predict future spot prices for a variety of commodities in a non-futures market environment and examines how the predictive power of the price system is altered after the initiation of futures trading. The results indicate a positive association between the inability of a non-futures market price system to predict the future spot price and the subsequent development of a futures market. The claim that traders can earn a return on information collection after the introduction of a futures price into the pricing system is supported for some, but not all, commodities.

Suggested Citation

  • Pamela P. Brannen & Edwin F. Ulveling, 1984. "Considering an Informational Role for a Futures Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(1), pages 33-52.
    • Handle: RePEc:oup:restud:v:51:y:1984:i:1:p:33-52.
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    File URL: http://hdl.handle.net/10.2307/2297703
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    Cited by:

    1. Kapil Gupta & Balwinder Singh, 2009. "Information Memory and Pricing Efficiency of Futures Contracts," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 8(2), pages 191-250, May.
    2. Raymond M. Leuthold, 1994. "Evaluating Futures Exchanges in Liberalising Economies," Development Policy Review, Overseas Development Institute, vol. 12(2), pages 149-164, June.
    3. Kapil Gupta & Balwinder Singh, 2007. "Investigating the Pricing Efficiency of Indian Equity Futures Market," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 32(4), pages 486-512, November.
    4. Bullock, David William, 1989. "Options and market information: a mean-variance portfolio approach," ISU General Staff Papers 1989010108000010107, Iowa State University, Department of Economics.

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