ROLLOVER HEDGING

Both market advisors and researchers have often suggested rollover hedging as a way of increasing producer returns. This study tests whether rollover hedging can increase expected returns for producers. For rollover hedging to increase expected returns, futures prices must follow a mean-reverting process. Using both the return predictability test based on long-horizon regression and the variance ratio test, we find that mean reversion does not exist in futures prices for corn, wheat, soybeans, soybean oil and soybean meal. The findings are consistent with the weak form of market efficiency. The results of the study imply that rollover hedging should not be seriously considered as a marketing alternative. As long as the commodity markets are efficient, the efforts of producers to improve returns through market timing strategies will meet limited success over time.


Subject(s):
Issue Date:
2000
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/18938
Total Pages:
15
Series Statement:
2000 Conference, Chicago, IL, April 17-18 2000




 Record created 2017-04-01, last modified 2017-11-19

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