Abstract
Past studies have used standard regression techniques to explain variation in estimated measures of the strength and speed of price transmission. We propose an alternative method for benchmarking the magnitude and the speed of restoring market efficiency that combines cointegration analysis with frontier estimation methods. The use of frontier methods highlights that market efficiency is a relative concept, and it provides a convenient way of accounting for sampling error in estimated measures of price transmission. We illustrate the proposed method using price data from 30 provincial pork markets in China from 2000 to 2017. As expected, the frontier magnitude and speed of restoring market efficiency both fall with increasing distance between two markets. We find significant province effects in the magnitude of market efficiency. Provinces located farther to the south and west display lower levels of market efficiency than those located in the northeast and central regions of China.
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