Efficiency Tests of the Agricultural Futures Exchange of Thailand: A Case of White Rice 5%.

The better reflection of future price on spot price indicates the higher efficiency of futures market because such market is able to respond rapidly to the market information. This research studies the efficiency of white rice 5% in the Agricultural Futures Exchange of Thailand (AFET). The relationship between the AFET prices and spot prices of white rice 5% was analyzed. Weekly data from August 2004 to December 2009 were used for the analysis. The results showed a long-term equilibrium relationship between the future prices and the spot prices for the white rice 5%. However, the price relationship was found to be inefficient at the statistical significant level of 0.01. In addition, the trade volume in the futures market has been small. This is one of the reasons causing the inefficiency. The government and private sectors should promote the use of the futures market. This should also include the decrease of intervention on pricing policies for products related to the futures market.