The futures premium and rice market efficiency in prewar Japan

Mikio Itou, Kiyotaka Maeda, Akihiko Noda

Research output: Contribution to journalArticle

Abstract

This article studies the interrelation between spot and futures prices in the two major rice markets in prewar Japan from the perspective of market efficiency. Applying a non-Bayesian time-varying model approach to the fundamental equation for spot returns and the futures premium, we detect when efficiency reductions in the two major rice markets occurred. We also examine how government interventions affected the rice markets in Japan, which colonized Taiwan and Korea before the Second World War, and argue that the function of rice futures markets crucially depended on the differences in the structure of rice spot markets. Initially the increased volume of imported rice of a different variety from domestic rice disrupted the rice futures markets. Then, government intervention in the rice futures markets failed to improve the disruption. Changes in colonial rice cropping successfully mitigated the disruption, and colonial rice was promoted in order to unify the different varieties of inland and colonial rice.

Original languageEnglish
Pages (from-to)909-937
Number of pages29
JournalEconomic History Review
Volume71
Issue number3
DOIs
Publication statusPublished - 2018 Aug 1

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Premium
Market efficiency
Japan
Futures markets
Colonies
Government intervention
Disruption
Government
Futures prices
Spot market
Korea
Time-varying
Second World War
Spot price
Taiwan
Fundamental
Equations

ASJC Scopus subject areas

  • History
  • Economics and Econometrics

Cite this

The futures premium and rice market efficiency in prewar Japan. / Itou, Mikio; Maeda, Kiyotaka; Noda, Akihiko.

In: Economic History Review, Vol. 71, No. 3, 01.08.2018, p. 909-937.

Research output: Contribution to journalArticle

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