The impact of global financial crisis on informational efficiency: Evidence from price-volume relation in crude palm oil futures market

You-How Go and Wee Yeap Lau

Journal of Commodity Markets, 2020, vol. 17, issue C

Abstract: This study examines price-volume relation in crude palm oil (CPO) futures market during the pre-crisis, crisis and post-crisis periods. Based on daily data from January 2000 to July 2017, cross-correlation function (CCF) provides four findings: First, volatilities of past trading volume and current return are correlated in pre- and post-crisis with an inconsistent sign, supporting the nature of noise trader demand. Second, in the pre-crisis period, both volatilities are negatively correlated within a short time span. Third, during the crisis period, there is no volatility spillover between both series. Fourth, in the post-crisis period, both volatilities of past trading volume and current return are positively correlated within a long time span, in addition to volatility spillover from the current return to the future trading volume which also happens within a short time span. Notably, significant volatility spillovers from trading volume to return across the crisis change the sign of correlations with a longer time span, supporting the “heterogeneity of traders” hypothesis. This study suggests that market participants have become risk-averse, particularly after the crisis. As a result, there has been an increase in volatility persistence which reduces the level of informational efficiency.

Keywords: Global financial crisis; Price-volume relation; Informational efficiency; Crude palm oil; Futures market; Heterogeneity of traders; Noise traders (search for similar items in EconPapers)
JEL-codes: G12 G13 G14 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:17:y:2020:i:c:s2405851317300028

DOI: 10.1016/j.jcomm.2018.10.003

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