The pricing efficiency of the live hog futures market is examined utilizing both necessary and sufficient conditions. Out-of-sample forecasts from an econometric model, an ARIMA model and a composite forecasting model are compared with the forward prices of the futures market within a mean squared error framework. At least one model, and frequently all of them, forecast more accurately than the futures market, a necessary condition for market efficiency. The sufficient condition is assessed using simulated market trading strategies based on the most accurate model forecasts. Results suggest that informational inefficiencies exist in the live hog futures market.
ASJC Scopus subject areas
- Economics and Econometrics