Measuring and Benchmarking Time-Varying Market Efficiency

Yali Mu; Stephan von Cramon-Taubadel; Gabriel Rosero; Bernhard Brümmer

doi:10.52825/gjae.v75i.2870

Authors

Yali Mu Nanjing Forestry University
Stephan von Cramon-Taubadel University of Göttingen https://orcid.org/0000-0002-7603-8094
Gabriel Rosero University of Göttingen https://orcid.org/0000-0003-3991-5980
Bernhard Brümmer University of Göttingen

DOI:

https://doi.org/10.52825/gjae.v75i.2870

Keywords:

Time-Varying Market Efficiency, State Space Modelling, Panel Stochastic Frontier, Benchmark

Abstract

This paper develops and implements an analytical framework combining spatial space techniques with panel stochastic frontier models to assess and benchmark time-varying market efficiency, with China’s pork market serving as the empirical application. We analyze spatial and temporal dynamics in adjustment speeds and compare inefficiency under a range of translog frontier specifications and market characteristics. The estimated market efficiency frontiers decline with greater geographic distances but improve with greater inter-market trade volume. Our analysis indicates that the Chinese pork market experiences significant inefficiencies (approximately 50%) in the speed of adjustment. The higher inefficiency is associated with rising diesel fuel prices. Roughly 35% of this inefficiency stems from short-term or transient shocks, and about 25% results from persistent, structural market characteristics. Overall, the study demonstrates that overlooking persistent inefficiency leads to an overestimation of the market’s ability to restore or maintain efficient spatial price transmission over time.

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Measuring and Benchmarking Time-Varying Market Efficiency

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