Noninformative and informative tests of efficiency in three energy futures markets

Emilio Peroni and Robert McNown

Journal of Futures Markets, 1998, vol. 18, issue 8, 939-964

Abstract: This article presents a critique of tests of market efficiency commonly applied to energy futures markets. Most of this literature fails to deal adequately with the endogeneity, nonstationarity, and cointegration characteristics of spot and futures prices, resulting in tests that are not informative about market efficiency. Consistent with this literature, application of these noninformative tests to spot and futures prices from three energy markets is generally not supportive of market efficiency. The article also presents two alternative tests of efficiency that properly deal with the stochastic features of these price series. Nonstationary data can be modeled with cointegration methods, allowing valid tests of the efficiency hypothesis. Alternatively, testing the equivalence of the data generation processes of the spot and futures prices provides an informative approach to efficiency testing with stationary data that does not suffer from endogeneity problems. Application of these two tests is largely supportive of weak and semistrong efficiency in three energy futures markets. © 1998 John Wiley & Sons, Inc. Jrl Fut Mark 18: 939–964, 1998

Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://hdl.handle.net/

Related works:
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:wly:jfutmk:v:18:y:1998:i:8:p:939-964

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().