Futures Markets Efficiency: evidence from unevenly spaced contracts

The hypothesis that futures price is an unbiased predictor of the future spot price has been oneof the most controversial topics in the empirical literature on market efficiency. The conflictingresults provided so far are not robust to the time period considered or to the econometricmethod chosen for testing. The aim of this paper is to analyse futures markets for five widelytraded commodities and test their efficiency within a new estimation framework which takesinto account the unevenly spaced data features of the contracts resulting from the seasonalnature of production and from the institutional aspects of the market. Such an importantcharacteristic of the time series data, although overlooked in all previous studies, can beconsidered one important source in an attempt to explain the highly variable and contrastingconclusions reached in the empirical literature on commodity market efficiency.The estimation procedure is carried out within a quasi-ECM framework by regime whichallows us to test the market efficient hypothesis for two different set of contracts according totheir sampling pattern. Therefore, more accurate and rigorous results are provided in thispaper, which, to a certain extent, reconcile the conflicting evidence produced so far...