Rational expectations, risk and efficiency in the London Metal Exchange: an empirical analysis

MacDonald, R. and Taylor, M. P. (1989) Rational expectations, risk and efficiency in the London Metal Exchange: an empirical analysis. Applied Economics, 21(2), pp. 143-153. (doi:10.1080/773142466)

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Abstract

There now exists a number of studies which reject efficiency of the London Metal Exchange, as a joint null hypothesis of rational expectations and risk neutrality. In this paper, we investigate the presence of time-varying risk premia in a number of metal price series, conditional on the assumption of rationality. Our findings include evidence to suggest that forward prices contain information on future spot prices over and above the information contained in current spot prices; that there is some evidence of time-varying premia in the forward prices for tin and zinc; and that the behaviour of these premia are intuitively plausible-in particular there appears to be significant covariation between risk premia and the expected spot price change.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:MacDonald, Professor Ronald
Authors: MacDonald, R., and Taylor, M. P.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Applied Economics
Publisher:Taylor and Francis
ISSN:0003-6846
ISSN (Online):1466-4283

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