The Spot-Forward Relationship in the Atlantic Salmon Market

AbstractThis review investigates the market performance of salmon forward contracts. It studies whether the forward price is an unbiased estimator of the spot price and whether the forward market generates price discovery information. The focus is on the Fish Pool market for the period from 2006 to 2017 and relates to forward contracts with maturities up to 60 months. The main finding is that there is strong cointegration up to a period of seven months. After this window, there is marginally significant cointegration up to a period of 12 months and the cointegration relationship disappears for contracts with maturities longer than 12 months, pointing to the inefficiency of these forward markets. The results from error-correction models and Granger causality tests suggest that the salmon forward market does not fulfill the expected price discovery role and that the spot market drives the forward market. These findings suggest the salmon forward market is still immature and cast doubt on the viability of lo...