Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67422
Authors: 
Otto, Sascha
Year of Publication: 
2010
Citation: 
[Journal:] The Open Economics Journal [ISSN:] 1874-9194 [Publisher:] Bentham Open [Place:] Sharjah [Volume:] 3 [Year:] 2010 [Pages:] 25-41
Abstract: 
This paper analyses the validity of the weak-form market efficiency, using the random-walk hypothesis for the six industrial base metals - copper, aluminium, zinc, nickel, tin and lead - traded at the London Metal Exchange. I analyse the behaviour of daily and weekly prices of the daily rolling three-month futures contracts, as these contracts exhibit the highest level of trading activity. In contrast to other efficient-market studies, the efficiency of futures prices is not tested as an unbiased predictor of the spot prices but from the predictability of futures prices themselves. I focus on the post-Tin Crisis period of 1989 to 2007. My test methodology includes the Box & Pierce Q-statistics, variance ratio tests by Lo and MacKinlay with homoscedastic and heteroscedastic test estimates, nonparametric ranks- and signs-based variance ratio tests by Wright and wild bootstrapping variance ratio tests by Kim. My sample basis fails to reject the random-walk hypothesis for all base metal futures except for lead.
Subjects: 
London Metal Exchange
LME
random walk
weak-form efficiency
futures markets
commodities
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Article
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