The Impact of Price Variability on Cash/Futures Market Relationships: Implications for Market Efficiency and Price Discovery

This study investigates the relationship between cash and future prices of soybeans and soybean meal over periods of high and low price variability. Error Correction models are estimated for each commodity’s cash and futures price. An exogenous measure of price variability is included in the model to determine if variability influences the equilibrium adjustment process. This, in turn, is used to measure the impact of price variability on short run market efficiency and the price discovery process. The analysis is applied to daily cash and futures prices from 1992 to 2013. The findings support the idea that increased price variability increases market adjustment rates and the price discovery process.


Issue Date:
2015
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/201850
Total Pages:
31
JEL Codes:
C22; C58
Note:
These represent the work of the authors Carlos Arnade and Linwood Hoffman but may not represent the views of the Economic Research Service or USDA




 Record created 2017-04-01, last modified 2017-08-28

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