A cointegration test for oil futures market efficiency

The cointegration properties of the oil futures market are analyzed to allow valid inference on market efficiency. The data used to test the efficiency of the oil futures market are monthly observations from the New York Mercantile Exchange for the period from March 1983 to September 1990, a total o...

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Bibliographic Details
Published in:The journal of futures markets 1993-12, Vol.13 (8), p.933-941
Main Authors: Crowder, William J., Hamed, Anas
Format: Article
Language:English
Subjects:
Arbitrage
Efficiency
Efficient markets
Futures
Futures market
Hypotheses
Market efficiency
Oil
Statistical analysis
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Summary:The cointegration properties of the oil futures market are analyzed to allow valid inference on market efficiency. The data used to test the efficiency of the oil futures market are monthly observations from the New York Mercantile Exchange for the period from March 1983 to September 1990, a total of 90 observations. The simple efficiency hypothesis implies that the expected return to futures speculation in the oil futures market should be zero. The arbitrage equilibrium hypothesis implies that the expected return to speculation in the oil futures market should equal the risk-free rate of return. The evidence supports the simple efficiency hypothesis but not the arbitrage equilibrium hypothesis.
ISSN:0270-7314
1096-9934
DOI:10.1002/fut.3990130810