Abstract
This study examines the potential of Shanghai crude oil (SCO) futures as a benchmark in the Asian market. We investigate the market efficiency and long-term equilibrium of SCO futures in comparison with global benchmarks, such as West Texas Intermediate, Brent, and Dubai crude oil futures. Despite the weak market integration between SCO futures and other international benchmarks, we find strong evidence that their market efficiency and long-term equilibrium do not significantly differ. We explain how current market properties are achieved using the information flow from international crude oil to the SCO futures market. Our findings present implications for investors and policymakers based on the unilateral information flow at the level and rise–fall pattern in the price series: (1) investors could exploit this pattern’s predictability in their investment strategy, and (2) regulators could implement open trading policies that would enable SCO futures to integrate with global benchmarks.
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