The efficiency of the london metal exchange: another look at the evidence |
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| Authors: | Peter S. Sephton Donald K. Cochrane |
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| Affiliation: | Department of Economics , University of New Brunswick , Fredericton , New Brunswick , CanadaE3B 5A3 |
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| Abstract: | Recent evidence suggests that some markets on the London Metal Exchange do not exhibit the major characteristics of efficient markets: rationality and risk neutrality. In this note we ilustrate several shortcomings of recent work in this area. We suggest that one can be confident that the tin market exhibited a risk premium, that is, was inefficient, between 1976 and 1985. Reliable results on the efficiency of the lead, copper, aluminium, and nickel markets escape the Fama approach to testing the efficient markets hypothesis as it is currently employed. |
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