Testing seasonality and efficiency in commodity futures markets

Futures market efficiency has been one of the most researched topics for a number of years.The huge amount of results produced, highly dependent on the econometric techniquesadopted and on the time period analysed, are often conflicting: for a given market, someauthors find evidence of efficiency, others of inefficiency. Although some of the conclusionsreached in the literature reflect genuine efficiency or inefficiency, some of them may reflect alack of attention paid to the institutional aspects governing the functioning of futures marketsand to the specific statistical characteristics of commodities time series price data, the mostrelevant of which, although not yet extensively investigated, are seasonality, overlapping dataand unevenly spaced observations.In this paper, we investigate thoroughly the effects of seasonality in testing efficiency over arange of commodities. An important question which is addressed is the extent to which strongand anticipated seasonal patterns can account for the inefficiency found in futures markets.The efficiency testing procedure is carried out within a quasi-ECM model augmented withseasonal deterministic terms...