RE-CONSIDERING THE NECESSARY CONDITION FOR FUTURES MARKET EFFICIENCY: AN APPLICATION TO DAIRY FUTURES

Dwight R. Sanders and Mark Manfredo

No 19025, 2004 Conference, April 19-20, 2004, St. Louis, Missouri from NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: The traditional necessary condition for futures market inefficiency is the existence of alternative forecasting methods that produce mean squared forecast errors smaller than the futures market. Here, a more exacting requirement for futures market efficiency is proposed-forecast encompassing. Using the procedure of Harvey and Newbold, multiple forecast encompassing is tested with the CME fluid milk futures contract. Time series models and experts at the USDA provide the competing forecasts. The results suggest that the CME fluid milk futures do not encompass the information contained in the USDA forecasts at a two-quarter forecast horizon.

Keywords: Marketing (search for similar items in EconPapers)
Pages: 14
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ncrfou:19025

DOI: 10.22004/ag.econ.19025

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