TESTING THE EFFICIENCY OF THE SOUTH AFRICAN FUTURES MARKET FOR WHITE MAIZE

Cointegration analysis is used to test whether the South African futures market for white maize was efficient (futures prices predict spot (cash) prices that reflect all publicly available information) in 1997 and 1998. Tests are also conducted to assess whether or not white maize futures prices are unbiased predictors of future spot prices (for effective price discovery). There was no long-run relationship between white maize futures and spot prices for 1997, but there is evidence of a long-run relationship between these price series in 1998. Furthermore, the 1998 futures price was an unbiased predictor of future spot prices for both the annual and three-month contract. This could be evidence of a market learning process and a progression towards efficiency, which has seen a marked increase in market liquidity (contract volumes traded) since late 1996