AN ECONOMETRIC-ANALYSIS OF THE MARKET FOR NATURAL-GAS FUTURES

This research tests a form of the efficient markets hypothesis in the market for natural gas futures. Unlike other studies of futures market s, the test for market efficiency is conducted at numerous locations w hich comprise the natural gas spot market in addition to the delivery location specified in the futures contract. Natural gas spot and futur es prices are found to be nonstationary and accordingly are modeled us ing recently developed maximum likelihood cointegration techniques. Th e futures market price is found to be cointegrated with nearly all of the spot market prices across the national network of gas pipelines. T he hypothesis of market efficiency can be rejected in 3 of the 13 spot markets examined.