TESTING MARKET EQUILIBRIUM: IS COINTEGRATION INFORMATIVE?

Cointegration methods are increasingly used to test for market efficiency and integration. The economic rationale for these tests, however, is generally unclear. Using a simple spatial equilibrium model to simulate equilibrium price behavior, it is shown that prices in a well-integrated, efficient market need not be cointegrated. Furthermore, the number of cointegrating relationships among prices is not a good indicator of the degree to which a market is integrated.


Issue Date:
1997-12
Publication Type:
Journal Article
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/30853
PURL Identifier:
http://purl.umn.edu/30853
Published in:
Journal of Agricultural and Resource Economics, 22, 2
Page range:
191-207
Total Pages:
17




 Record created 2017-04-01, last modified 2020-10-28

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