The Impact of Global Financial Crisis on Informational Efficiency: Evidence from Price-Volume Relationship in Crude Palm Oil Futures Market

Abstract

As a source of energy of biofuel and edible oil, the fluctuation of crude palm oil prices is the concern of producers and manufacturers. However, little is known about the impact of global financial crisis on informational efficiency of crude palm oil (CPO) futures market. Hence, this study aims to examine information spillover between the CPO futures price changes and volume during the pre-crisis, crisis and post-crisis periods. Result of augmented analysis provides three findings: First, in pre-crisis period, trading volume transmits information to return, in contrast return dominates this role in the post-crisis period. This asymmetric information flow supports the “heterogeneity of traders” hypothesis. Second, the volatility persistence of augmented model is relatively higher than univariate model during the post-crisis, this shows that informational efficiency has decreased after the crisis. Third, inconsistent time span observed in cross-correlation function also supports the noise traders’ hypothesis in the CPO futures market. This study observes that traders have acquired new behavior in the post-crisis period by relying on returns as the proxy of information flow.