Testing roundwood market efficiency using a multivariate cointegration estimator

This study develops a framework for testing roundwood market efficiency. The analysis is carried out on the Norwegian sawlog market. Using Johansen's multivariate cointegration estimator three systems were estimated: (i) domestic, imported and exported sawlogs; (ii) domestic pulpwood and sawlogs; and (iii) lumber exports/imports and domestic sawlogs. Cointegrating relations were found in all three systems, indicating the presence of a common stochastic trend within each model. The Law of One Price and weak exogeneity were tested on all systems. The Swedish sawlog market was found to impact price formation in the Norwegian market. It is concluded that the Norwegian sawlog market is functioning adequately. (C) 2002 Elsevier Science B.V. All rights reserved.