Pricing in futures and forward markets for non-ferrous metals: an empirical critique

 

The analysis of commodity futures markets is an important field of empirical research in finance. A wealth of theoretical and empirical research has seen the development of models to analyse the properties of non-ferrous metals futures and forward prices. Several models use recent advances in the analysis of non-stationary data Particular attention has been paid to efficiency, risk premia and price behaviour of contracts on the major futures and forward exchanges for non-ferrous metals. Using results based on both futures and forward price data, the performance of models specifically developed for analysing the pricing of futures contracts or forward contracts are compared. The purpose of the paper is to evaluate the significance of the empirical models published in lending futures market journals since 1990. Published empirical research is evaluated in the light of the type of contract examined, frequency of data used, choice of both dependent and explanatory variables, use of proxy variables, type of model chosen, economic hypotheses tested, methods of estimation and calculation of standard errors for inference, reported descriptive statistics, use of diagnostic tests of auxiliary assumptions, use of nested and non-nested tests, use of information criteria, and empirical implications for non-ferrous metals.

Keywords: Empirical models, Econometric critique, Futures, Industrial metals, Commodities, Metals