Commodity futures and market efficiency

Ladislav Krištoufek () and Miloslav Vošvrda

Energy Economics, 2014, vol. 42, issue C, 50-57

Abstract: We analyze the market efficiency of 25 commodity futures across various groups—metals, energies, soft commodities, grains and other agricultural commodities. To do so, we utilize the recently proposed Efficiency Index to find out that the most efficient among all of the analyzed commodities is heating oil, closely followed by WTI crude oil, cotton, wheat, and coffee. On the other end of the ranking scale we find live cattle and feeder cattle. The efficiency is also found to be characteristic for specific groups of commodities, with energy commodities being the most efficient and other agricultural commodities (composed mainly of livestock) the least efficient groups. We also discuss contributions of long-term memory, fractal dimension and approximate entropy to the total inefficiency. Last but not least, we come across the nonstandard relationship between the fractal dimension and the Hurst exponent. For the analyzed dataset, the relationship between these two variables is positive, meaning that local persistence (trending) is connected to global anti-persistence. We attribute this behavior to specifics of commodity futures: they may be predictable over a short term and locally, but over a long term they return to their fundamental prices.

Keywords: Commodities; Efficiency; Entropy; Long-term memory; Fractal dimension (search for similar items in EconPapers)
JEL-codes: C10 G14 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (70)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988313002776
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Commodity futures and market efficiency (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:42:y:2014:i:c:p:50-57

DOI: 10.1016/j.eneco.2013.12.001

Access Statistics for this article

Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant

More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().