Examination of the efficiency of commodity markets in Iran using cost of carry model

This study was carried out aimed to test the efficiency of the commodity market through an econometric regression model called the "Cost of carry model". Market efficiency is measured by examining the relationship between the commodity's futures price and the market value of the underlying asset and through the time-series of the price behavior in the market. This proposed model for market efficiency is superior to other alternative models (such as Variance-ratio test and Jarque-Bera Test), which only pays attention to the price behavior of the commodity market. Accordingly, the data of cumin seeds, saffron and gold coins transactions have been collected from the Iran Commodity Exchange in a 360-day period, and have been tested using the cost-of- carry model in practice. According to the results, the market is unable to detect the price of a futures contract (FP) and the lack of convergence of the market value of the underlying asset and the price of a futures contract indicates the rejection of market efficiency.