African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4194

Full Length Research Paper

Price discovery in the South African White maize futures market

Barry Strydom1 and Kerry McCullough2*
1Room 332, New Arts Building, School of Accounting, Economics and Finance, University of KwaZulu-Natal, Private Bag X01, Scottsville, 3209, South Africa. 2Room 334, New Arts Building, School of Accounting, Economics and Finance, University of KwaZulu-Natal, Private Bag X01, Scottsville, 3209, South Africa.   JEL classification: C58, D53, G12, G13.
Email: [email protected]

  •  Published: 14 July 2013

Abstract

This study examined the price discovery process in the South African futures and spot markets for white maize. Engle-Granger and Johansen tests of cointegration were performed after which an Error Correction Model, Vector Error Correction Model and Impulse Response functions were formulated representing the long-run relationship between spot and futures prices for white maize. It was found that spot and futures prices for white maize were cointegrated indicating the presence of a long-run relationship between spot and futures prices. Further study on this relationship indicated that price discovery occurred in the spot market. The paper concludes by discussing the policy implications of this finding.

 

Key words: Price discovery, spot market, futures market, cointegration.

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