The Journal of Futures Markets, Vol. 19, No. 3, 353–376 (1999)  1999 by John Wiley & Sons, Inc. CCC 0270-7314/99/030353-24 The Forward Pricing Function of the Shipping Freight Futures Market MANOLIS G. KAVUSSANOS* NIKOS K. NOMIKOS This article investigates the unbiasedness hypothesis of futures prices in the freight futures market. Being the only market whose underlying asset is a service, it sets it apart from other markets investigated so far in the literature. Cointegration techniques, employed to examine this hypothesis, indicate that futures prices one and two months be- fore maturity are unbiased forecasts of the realized spot prices, whereas a bias exists in the three-months futures prices. This mixed evidence is in agreement with studies in other markets and suggests that the acceptance or rejection of unbiasedness depends on the id- iosyncrasies of the market under investigation and on the time to maturity of the contract. Despite the existence of a bias in the three- months prices, futures prices for all maturities are found to provide forecasts of the realized spot prices that are superior to forecasts gen- erated from error correction, ARIMA, exponential smoothing, and Note: This article has largely benefited from the helpful comments of the Editor and two anonymous referees. We would also like to thank Mr. Doug Thow of LIFFE and participants at the International Association of Maritime Economists 1997 Conference for their helpful comments on an earlier draft of this article. Thanks are also due to Simpson, Spencer and Young (SSY) Limited and LIFFE for providing the data for this study. All remaining errors are the responsibility of the authors. *Correspondence author, Department of Shipping Trade and Finance, City University Business School, Frobisher Crescent, Barbican Centre, London EC2Y 8HB, United Kingdom. ■ Manolis Kavussanos is a Senior Lecturer in the Department of Shipping Trade and Finance at the City University Business School in London. ■ Nikos K. Nomikos is a Research Assistant in the Department of Shipping Trade and Finance at the City University Business School in London.