EFFICIENCY TESTS OF FUTURES MARKETS FOR UK AGRICULTURAL COMMODITIES

Abstract

An efficient futures market should provide a forecast of the future spot price which reflects all publicly available information; ideally, for effective price discovery such forecasts would also be unbiased. Evidence for market efficiency, much of which is US based, is mixed and despite its importance from both public and private perspectives, there are relatively few studies of futures market efficiency in relation to UK agricultural commodities. This paper presents the results of a study of market efficiency in relation to three distinct UK futures markets using a cointegration methodology. The results provide evidence of efficiency and unbiasedness in relation to wheat, some concerns with respect to efficiency in relation to potatoes and pigmeat and some concerns about bias in relation to potatoes.