Testing market efficiency of crude palm oil futures for European participants
Liu, Xing (2011)
Palm oil is the most consumed and traded vegetable oils in the EU and the world. Increasing non-food uses for vegetable oils in especially feedstock of biofuels in recent years have caused the price volatility to rise in both the EU and the global market. The most efficient pricing of crude palm oil (CPO) is to found in Bursa Malaysia (BMD), and it provides by far the world s most liquid palm oil contract. The goal of this chapter is to investigate the CPO futures market efficiency of BMD for the European participants with delivery location in the EU. Both Johanson s cointegration test and the Vector Error Cointegration Mechnism (VECM) are conducted to test long-run and short-run efficiency test for the European spot market and four different futures forecasting horizons that are one week, two weeks, one month and two months. Evidence suggests that a long-run equilibrium relationship exists between the futures price and spot price for all forecasting horizons.
- Julkaisut