Ahmad, Norzalina and Kellard, Neil and Snaith, Stuart (2013) Crude palm oil futures market efficiency: Long memory investigation. In: 2nd International Conference on Management, Economics and Finance (2nd ICMEF 2013), 28 -29 Oktober 2013, Novotel 1Borneo, Kota Kinabalu, Sabah, Malaysia.

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Abstract

The two fundamental functions of a futures market is the price discovery function and the hedging (or risk transfer) function. These functions can be achieved optimally if the market is efficient. This study employs daily data for the Malaysian crude palm oil (CPO) futures from 1997 to 2010 to explore the impact of the time series properties of the futures-spot basis and the cost of carry on futures market unbiasedness. The main result is that the basis of the CPO futures exhibit long memory component. Using interest rate as a proxy for cost of carry, our results support the evidence of the long memory. This evidence of long memory implies the existence of persistence in the data and as consequence; future spot price observations might be predictable on the basis of past realisations of the data. This leads to the rejection of unbiasedness hypothesis and therefore exhibits market inefficiency.

Item Type:	Conference or Workshop Item (Paper)
Additional Information:	ISBN: 978-967-5705-12-0
Uncontrolled Keywords:	Efficient market hypothesis, Long memory, Crude palm oil futures market
Subjects:	H Social Sciences > HD Industries. Land use. Labor
Divisions:	School of Economics, Finance & Banking
Depositing User:	Mrs. Norzalina Ahmad
Date Deposited:	21 Oct 2014 07:20
Last Modified:	18 Apr 2016 00:46
URI:	https://repo.uum.edu.my/id/eprint/12274

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