Toward Efficiency in the Crude-Oil Market

Steven L Green and Knut Anton Mork

Journal of Applied Econometrics, 1991, vol. 6, issue 1, 45-66

Abstract: The "official" (OPEC) prices of crude oil before the collapse inthe oil market in the mid-1980s can be interpreted as contract prices and analyzed on the basis of the theory of futures (or forward) markets. This paper uses the generalized method of moments estimation technique to test for efficiency in the relationship between the official prices and the ex- post spot prices at the time of delivery. Efficiency is rejected for the sample period 1978-85 as a whole, but evidence is found of improvements over time. Further, the GMM Wald and Hansen tests, although asymptotically equivalent, are shown to differ greatly when applied to a small sample of monthly oil price data. Copyright 1991 by John Wiley & Sons, Ltd.

Date: 1991
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