A version of the paper was presented at a symposium on Financial Econometrics of Derivative Securities and Markets hosted by Deakin University. The authors would like to thank symposium participants, and in particular Robert Webb (the editor) for many valuable comments and suggestions.
Testing the Efficient Market Hypothesis in Conditionally Heteroskedastic Futures Markets
Article first published online: 10 JUN 2013
© 2013 Wiley Periodicals, Inc.
Journal of Futures Markets
Special Issue: Special Issue from the 1st Symposium on the Financial Econometrics of Derivative Securities and Markets
Volume 33, Issue 11, pages 1024–1045, November 2013
How to Cite
Westerlund, J. and Narayan, P. (2013), Testing the Efficient Market Hypothesis in Conditionally Heteroskedastic Futures Markets. J. Fut. Mark., 33: 1024–1045. doi: 10.1002/fut.21624
- Issue published online: 16 AUG 2013
- Article first published online: 10 JUN 2013
- Manuscript Accepted: 1 APR 2013
- Manuscript Received: 1 MAR 2013
Most empirical evidence suggests that the efficient market hypothesis, stating that spot and futures prices should cointegrate with a unit slope on futures prices, does not hold. These results have recently motivated researchers to start looking for more “informative” tests, and the current paper takes a step in this direction. However, unlike existing tests, the test proposed here exploits the information contained in the heteroskedasticity of the data, which is expected to lead to more accurate inference, a result that is confirmed by our findings. © 2013 Wiley Periodicals, Inc. Jrl Fut Mark