Price discovery for CPO

Lead - lag relations between cash and futures prices of CPO may arise as an important issue. This research will focuses on the price discovery process for CPO. Price discovery in futures markets refers to the use of futures price in determining cash market prices1 . Firstly, I will study the relationship between spot market in physical and futures market in the KLCE and to determine whether CPO futures price is capable of providing some relevant information for predicting the spot. The period of study is from January 1990 - December 1994. In order to determine the relationship between futures and spot price, I have used the simple linear regression ( Least-Squares Method), and the result showed that there is a linear relationship between spot price and futures prices between the year of 1990 to 1994. Futures prices appear to be a reliable tool for the prices of spot prices in physical market.