Market efficiency and forecasting of rubber futures

Abstract

Suppanunta Romprasert

This study, addresses the question “Is price process in rubber futures market efficient?” Time series data from rubber futures was used as leading indicator for the spot price of Thailand. The results indicate that, the daily futures prices served as unbiased estimators of future spot prices and there was independence on daily price changes. The tests, consistently supported the unbiased hypothesis which implies that, Thailand’s rubber futures market is efficient and aids the process of price. This study, would fill the information gap in the prediction of future spot prices with a guide to understanding how the futures market behaves. Part of forecasting, the study employs univariate, market timing and Diebold-Mariano as the criterions for the selection of the best prediction model. It includes an analysis of factors affecting the rubber futures prices in Thailand’s futures market. The results, show that, TOCOM, world synthetic rubber consumption, net imports natural rubber (China) and crude oil price significantly affect futures prices in the same direction. Particularly, crude oil price is the leading indicator for the trend in rubber futures prices in Thailand. The analytical model is shown to be applicable and would facilitate related studies in forecasting the futures prices of other commodities.

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