Efficiency Tests of the Agricultural Futures Exchange of Thailand: A Case of White Rice 5%

Supansa Yuenyoung and Apichat Daloonpate ()
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Apichat Daloonpate: Department of Agricultural and Resource Economics,Faculty of Economics,Kasetsart University,Thailand

No 201102, Working Papers from Kasetsart University, Department of Agricultural and Resource Economics

Abstract: The better reflection of future price on spot price indicates the higher efficiency of futures market because such market is able to respond rapidly to the market information. This research studies the efficiency of white rice 5% in the Agricultural Futures Exchange of Thailand (AFET). The relationship between the AFET prices and spot prices of white rice 5% was analyzed. Weekly data from August 2004 to December 2009 were used for the analysis. The results showed a long-term equilibrium relationship between the future prices and the spot prices for the white rice 5%. However, the price relationship was found to be inefficient at the statistical significant level of 0.01. In addition, the trade volume in the futures market has been small. This is one of the reasons causing the inefficiency. The government and private sectors should promote the use of the futures market. This should also include the decrease of intervention on pricing policies for products related to the futures market.

Keywords: market efficiency; AFET; cointegration; white rice 5% (search for similar items in EconPapers)
JEL-codes: D43 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2011-07
New Economics Papers: this item is included in nep-agr and nep-sea
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Published in ARE Working Paper No. 2554/2 (July 2011)

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