The Change of Pricing System of Wholesale Markets and Price Efficiency :

the Case of Tokyo Central Wholesale Markets

Abstract

Based on the Weak-Form Assumption provided by E. Fama, this study examines the price efficiency of primal vegetables transacted at nine of Tokyo Central Wholesale Markets using time series analysis. The duration of the study (1989-2004) is divided into two periods, the period that traditional auction pricing was dominated and the period that pre-negotiated pricing and transaction was partly introduced, and comparative analysis on price efficiency is conducted. Two-Step Estimation Procedures for Dynamic Modeling suggested by Engel and Granger (1987) is applied as the analytical method in the study.
According to the results of this study, at Tokyo Central Wholesale Markets, since when pre-negotiated pricing was considerably developed, the time series price behavior showed comparatively clear tendency of recovering from external shocks and, as a result, price stability was obtained than before from a perspective of long-term equilibrium, although there was price change in a short term due to the changes in market supply. The results indicated that spatial price differences among nine central wholesale markets were negligible. The study concluded that the prices formed at wholesale markets are efficient enough.