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Int. J. Financial Stud. 2017, 5(2), 11;

Analysis of the Relationship between Ethanol Spot and Futures Prices in Brazil

Department of Economics, Administration and Sociology, University of São Paulo, 13418-900 Piracicaba, SP, Brazil
Department of Biosystems Engineering, University of São Paulo, 13635-900 Pirassununga, SP, Brazil
Author to whom correspondence should be addressed.
Academic Editor: Nicholas Apergis
Received: 3 October 2016 / Revised: 24 February 2017 / Accepted: 15 March 2017 / Published: 1 April 2017
(This article belongs to the Special Issue Energy Finance)
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In this work, an investigation and analysis are carried out in order to observe the relationship between ethanol spot and futures prices in Brazil. We adopted the Engle and Granger co-integration approach. Also, we consider the information share method proposed by Hasbrouck in order to examine the market efficiency in price discovery and information transmission. Results show that although the futures market is efficient in price discovery and information transmission, the cash market leads the long-run price discovery process. This suggests that the underlying cause of the dominance of the available market over the futures market can be attributed to the market’s relative concentration in wholesale ethanol distribution due to the formation of marketing pools by the ethanol mills, as well as the small number of distributors that control a significant portion of the market share. View Full-Text
Keywords: ethanol; futures markets; Brazil; price discovery; BM&F-BOVESPA ethanol; futures markets; Brazil; price discovery; BM&F-BOVESPA

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Quintino, D.D.; David, S.A.; Vian, C.E.F. Analysis of the Relationship between Ethanol Spot and Futures Prices in Brazil. Int. J. Financial Stud. 2017, 5, 11.

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