Forward pricing and efficiency in the Silver market. 1983
This 1983 paper assesses whether the silver spot-futures market is efficient asking, is the futures price of silver an unbiased forecast of future spot silver prices. It does this by regressing spot prices and futures prices to see if a one for one relationship exists over the full sample.
He finds that the relationship is not unbiased over the sample period. These results should be treated with caution however as the paper does not assess whether the two variables are cointegrated (as this was not common practise in 1983), a necessary condition for this type of analysis. As a result the findings are suspect.
Data: Monthly Jan 1973 -Dec 1979
Method: Instrumental Variables, OLS
Full Citation: Goss, Barry A. “Forward pricing and efficiency in the silver market.” Resources Policy 9.1 (1983): 54-63.
Abstract: If futures prices ‘fully reflect’ all available information, then these prices may be interpreted as market anticipations of spot (cash) prices at the delivery date of the futures contract. This hypothesis, which has tended to find most support among established markets for storable commodities, is investigated for the Chicago silver futures market. Using instrumental variable estimation and a joint (χ2) test, the unbiased prediction hypothesis is rejected, and a tentative explanation is offered for this outcome. This result, however, does not necessarily imply that the market is inefficient, and two tests of the weak form efficient markets hypothesis suggest that, while there is some slight dependence in past prices, this is only marginally more than would be expected from normal sampling variation.