The traditional necessary condition for futures market inefficiency is the existence of alternative forecasting methods that produce mean squared forecast errors smaller than the futures market. Here, a more exacting requirement for futures market efficiency is proposed-forecast encompassing....

Myers and Thompson (1989) pioneered the concept of a generalized approach to estimating hedge ratios, pointing out that the model specification could have a large impact on the hedge ratio estimated. While a huge empirical literature exists on estimating hedge ratios, the literature is lacking a...