The price discovery of the Malaysian crude palm oil futures markets

This paper investigates the market efficiency of the Malaysian crude palm oil prices using data for the sample period spanning from 1998:01 – 2010:12. The univariate unit root test confirms that all series are non-stationary in their levels. The Johansen multivariate test provides empirical evidence for spot and futures prices are co-integrated. This implies that the market efficiency hypothesis can be easily rejected. The Error-Correction Model (ECM) also shows that there is a dynamics relationship between spot and futures prices. This provides further evidence that the crude palm oil prices do possess the price discovery function. -- market efficiency ; price discovery ; hedging ; co-integration