Price Hikes in US Agricultural Commodity Futures Markets: An Empirical Efficiency Test
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This paper evaluates how efficient US futures prices have predicted future spot prices since
2006. It uses cointegration and causality methods to assess the efficiency of US commodity
futures markets. The cointegration between the spot and futures price is a necessary condition
for our definition of market efficiency. It ensures that there exists a long-run equilibrium
relationship between the two prices (Ali and Gupta 2011). Causality assists in examining the
existence of lead or lag relationships between futures and spot prices in order to make inferences
on the directions (unidirectional or bidirectional) of information flow.