Abstract The pricing efficiency of the live cattle futures market is evaluated using out‐of‐sample forecasts from an econometric model, an ARIMA model, and composite forecasting procedures. In terms of the mean‐squared error criterion, a necessary condition for market efficiency, at least one of the models, and frequently more, forecasted more accurately than did the futures market. However, market simulation results based on the most accurate forecasts generated large risk‐return ratios. These results do not show strong evidence of inefficiency and call into question the use of only mean‐squared errors to examine a market's pricing efficiency.
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