An examination of cointegration relations between futures and local grain markets

Fortenbery, T. Randall; Zapata, Héctor O.

doi:10.1002/fut.3990130809

Cited by 53 publications

(38 citation statements)

References 16 publications

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“…The period from 1979 to 1987 was hypothesized to be more efficient than the period from 1973 through 1979 (Garcia et al 1988). Fortenberry and Zapata (1993) evaluated the relationship of the North Carolina corn and soybean markets with respect to CBOT -no strong evidence was found to reject the efficiency hypothesis. Aulton et al (1997) investigated the efficiency of agricultural commodities in UK markets.…”

Section: Literature Reviewmentioning

confidence: 99%

Analysis of Selected Seasonality Effects in the Following Agricultural Markets: Corn, Wheat, Coffee, Cocoa, Sugar, Cotton and Soybeans

Borowski¹,

Lukasik²

2015

EJBM

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The commodity market has been becoming one of the main popular segments of the financial markets among individual and institutional investors in recent years, due to downward trend on the stock exchanges. Likely to the equity market, the problem of anomalies in the commodities market is becoming an interesting phenomenon, particularly in the segment of the agricultural market. This paper tests the hypothesis of monthly, the day-of-the week and weekend effects of seven agricultural commodities quoted in the period of 01.01.1994 -31.12.2014. Calculations presented in this paper indicate the absence of the monthly effect on coffee market and the existence of monthly effect in the case of another six analyzed agricultural commodities: corn, wheat, sugar, cocoa, cotton and soybeans. In the analyzed period, no occurrence of day-of-theweek effect was proven for corn, cotton and soybeans. The day-of-the-week effect was registered on the markets of: wheat, coffee, sugar and cocoa and the weekend effect was observed only on the cocoa market.

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Section: Literature Reviewmentioning

confidence: 99%

Analysis of Selected Seasonality Effects in the Following Agricultural Markets: Corn, Wheat, Coffee, Cocoa, Sugar, Cotton and Soybeans

Borowski¹,

Lukasik²

2015

EJBM

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“…However, efficient markets may reject the above joint hypothesis for a number of reasons, some of which include the presence of a risk premium 4 (Krehbiel and Adkins, 1993;Beck, 1993), the inability of the futures price to reflect all publicly available information (Beck, 1994), and the inefficiency of agents as information processors (Kaminsky and Kumar, 1990). Also, as noted for example by Fortenbery and Zapata (1993), lack of efficiency can occur for commodities in which returns to storage or transportation are non-stationary.…”

Section: Forms Of Market Efficiencymentioning

confidence: 99%

“…3 See for instance Lai and Lai (1991), Fortenbery and Zapata (1993), Beck (1994), Zheng et al (2012). 4 According to the hedging theory originally proposed by Keynes (1930), commodity producers and inventory holders sell futures contracts at a price below the expected future spot price to avoid the price risk associated with their long positions in the underlying commodity.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The adoption of the log form is also a common practice in the statistical analysis of the prices of futures contracts (Garbade and Silber, 1983;Serletis and Scowcroft, 1991;Fortenbery and Zapata, 1993;Fujihara and Mougoué, 1997;Moosa and Silvapulle, 2000;Joyeux and Milunovich, 2010). Using lower case letters for logs, the level equation can be written as:…”

Section: The Theoretical Model and The 'Basis'mentioning

confidence: 99%

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Back to the Futures: An Assessment of Commodity Market Efficiency and Forecast Error Drivers

Algieri

Kalkuhl

2014

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe role of futures markets in stabilizing spot prices has been extensively discussed. Nevertheless, the ability of these markets to achieve the stabilizing function significantly depends on whether they are 'efficient' in the sense that futures prices 'fully reflect' the available information. The purpose of this study is first to gauge the extent to which futures markets for a set of traded commodities can be considered efficient in predicting spot prices. We then go beyond traditional analyses of efficiency and assess the relative forecasting performance of futures markets; i.e., the difference between the realization and prediction of future spot prices, and what factors affect these forecast errors. The results of the analysis show that maize, soybeans, and wheat markets are not informationally efficient, so that investors can make outsize profits. We find that short-term speculation, measured by the scalping index, increases the noises in the information formation process, thus increasing forecast errors. Conversely, long-term speculation, proxied by the Working-T index and the speculative pressure index, reduces forecast errors although their quantitative effect is negligible. Other relevant factors that drive forecast errors up are a high level of realized price volatility, the lack of liquidity in the market, and a longer contract maturity horizon.

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“…An important component in understanding and managing market price risk for maize is identifying the relationship between local cash and nationally traded commodity futures market prices. Understanding the extent to which cash prices are cointegrated with national futures prices -that is, whether or not they move apart through time -is critical in 'localizing' futures price information (Fortenbery & Zapata, 1993).…”

Section: Please Scroll Down For Articlementioning

confidence: 99%

Testing the Efficiency of the South African Futures Market for White Maize / Toetsing Van Die Doeltreffendheid Van Die Suid-Afrikaanse Termynkontrakmark Vir Witmielies

Wiseman

Darroch

Ortmann

1999

Agrekon

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An examination of cointegration relations between futures and local grain markets

Cited by 53 publications

References 16 publications

Analysis of Selected Seasonality Effects in the Following Agricultural Markets: Corn, Wheat, Coffee, Cocoa, Sugar, Cotton and Soybeans

Analysis of Selected Seasonality Effects in the Following Agricultural Markets: Corn, Wheat, Coffee, Cocoa, Sugar, Cotton and Soybeans

Back to the Futures: An Assessment of Commodity Market Efficiency and Forecast Error Drivers

Testing the Efficiency of the South African Futures Market for White Maize / Toetsing Van Die Doeltreffendheid Van Die Suid-Afrikaanse Termynkontrakmark Vir Witmielies

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