Crude palm oil futures market efficiency: Long memory investigation
The two fundamental functions of a futures market is the price discovery function and the hedging (or risk transfer) function. These functions can be achieved optimally if the market is efficient. This study employs daily data for the Malaysian crude palm oil (CPO) futures from 1997 to 2010 to explo...
| Main Authors: | , , |
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| Format: | Conference or Workshop Item |
| Language: | English |
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2013
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| Subjects: | |
| Online Access: | https://repo.uum.edu.my/id/eprint/12274/1/2409140410.pdf |
| _version_ | 1825802980308287488 |
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| author | Ahmad, Norzalina Kellard, Neil Snaith, Stuart |
| author_facet | Ahmad, Norzalina Kellard, Neil Snaith, Stuart |
| author_sort | Ahmad, Norzalina |
| collection | UUM |
| description | The two fundamental functions of a futures market is the price discovery function and the hedging (or risk transfer) function. These functions can be achieved optimally if the market is efficient. This study employs daily data for the Malaysian crude palm oil (CPO) futures from 1997 to 2010 to explore the impact of the time series properties of the futures-spot basis and the cost of carry on
futures market unbiasedness. The main result is that the basis of the CPO futures exhibit long
memory component. Using interest rate as a proxy for cost of carry, our results support the evidence of the long memory. This evidence of long memory implies the existence of persistence in the data and as consequence; future spot price observations might be predictable on the basis of past realisations of the data. This leads to the rejection of unbiasedness hypothesis and therefore exhibits market inefficiency. |
| first_indexed | 2024-07-04T05:49:27Z |
| format | Conference or Workshop Item |
| id | uum-12274 |
| institution | Universiti Utara Malaysia |
| language | English |
| last_indexed | 2024-07-04T05:49:27Z |
| publishDate | 2013 |
| record_format | eprints |
| spelling | uum-122742016-04-18T00:46:24Z https://repo.uum.edu.my/id/eprint/12274/ Crude palm oil futures market efficiency: Long memory investigation Ahmad, Norzalina Kellard, Neil Snaith, Stuart HD Industries. Land use. Labor The two fundamental functions of a futures market is the price discovery function and the hedging (or risk transfer) function. These functions can be achieved optimally if the market is efficient. This study employs daily data for the Malaysian crude palm oil (CPO) futures from 1997 to 2010 to explore the impact of the time series properties of the futures-spot basis and the cost of carry on futures market unbiasedness. The main result is that the basis of the CPO futures exhibit long memory component. Using interest rate as a proxy for cost of carry, our results support the evidence of the long memory. This evidence of long memory implies the existence of persistence in the data and as consequence; future spot price observations might be predictable on the basis of past realisations of the data. This leads to the rejection of unbiasedness hypothesis and therefore exhibits market inefficiency. 2013 Conference or Workshop Item PeerReviewed application/pdf en https://repo.uum.edu.my/id/eprint/12274/1/2409140410.pdf Ahmad, Norzalina and Kellard, Neil and Snaith, Stuart (2013) Crude palm oil futures market efficiency: Long memory investigation. In: 2nd International Conference on Management, Economics and Finance (2nd ICMEF 2013), 28 -29 Oktober 2013, Novotel 1Borneo, Kota Kinabalu, Sabah, Malaysia. http://www.internationalconference.com.my/proceeding/ |
| spellingShingle | HD Industries. Land use. Labor Ahmad, Norzalina Kellard, Neil Snaith, Stuart Crude palm oil futures market efficiency: Long memory investigation |
| title | Crude palm oil futures market efficiency: Long memory investigation |
| title_full | Crude palm oil futures market efficiency: Long memory investigation |
| title_fullStr | Crude palm oil futures market efficiency: Long memory investigation |
| title_full_unstemmed | Crude palm oil futures market efficiency: Long memory investigation |
| title_short | Crude palm oil futures market efficiency: Long memory investigation |
| title_sort | crude palm oil futures market efficiency long memory investigation |
| topic | HD Industries. Land use. Labor |
| url | https://repo.uum.edu.my/id/eprint/12274/1/2409140410.pdf |
| work_keys_str_mv | AT ahmadnorzalina crudepalmoilfuturesmarketefficiencylongmemoryinvestigation AT kellardneil crudepalmoilfuturesmarketefficiencylongmemoryinvestigation AT snaithstuart crudepalmoilfuturesmarketefficiencylongmemoryinvestigation |