TESTING MARKET EQUILIBRIUM: IS COINTEGRATION INFORMATIVE?

Cointegration methods are increasingly used to test for market efficiency and integration. The economic rationale for these tests, however, is generally unclear. Using a simple spatial equilibrium model to simulate equilibrium price behavior, it is shown that prices in a well-integrated, efficient market need not be cointegrated. Furthermore, the number of cointegrating relationships among prices is not a good indicator of the degree to which a market is integrated.

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Year of publication:	1997
Authors:	McNew, Kevin ; Fackler, Paul L.
Published in:	Journal of Agricultural and Resource Economics. - Western Agricultural Economics Association - WAEA. - Vol. 22.1997, 02
Publisher:	Western Agricultural Economics Association - WAEA
Subject:	Demand and Price Analysis

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Extent:	application/pdf
Type of publication:	Article
Source:	RePEc - Research Papers in Economics

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