Price discovery in the Tanker Future Market, a survey on the IMAREX Tanker Derivative

This paper examines the tanker freight future traded on Imarex, and to which degree these are found to discover future spot prices. This is done through testing the forward rate unbiasedness hypothesis and the lead lag relationship between future and spot contracts. In all modelling the framework of cointegration and the Johannsen VECM approach is applied. All model estimation has been done in STAT 9.0, and E-views 5.1. Results from Granger causality tests and Impulse response analysis find that there is evidence that the future contract discovers new information faster then the spot contract, and that pricing mechanisms in the futures market are better at reacting correctly to shocks both in future and spot prices. However no evidence of the future being an unbiased predictor of future levels of spot price is found