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Asymmetric spot‐futures price adjustments in grain markets
Author(s) -
Wu Zhige,
Maynard Alex,
Weersink Alfons,
Hailu Getu
Publication year - 2018
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21966
Subject(s) - futures contract , normal backwardation , spot contract , economics , volatility (finance) , spot market , forward market , financial economics , futures market , mid price , price discovery , monetary economics , econometrics , price level , electricity , electrical engineering , engineering
Recent volatility in food prices in the grain market has generated much interest among agricultural market participants. This study examines the nonlinear dynamic relationship between spot and futures prices in grain markets. The empirical results provide strong evidence of price asymmetries. The corn spot price adjusts faster to futures price increases than futures price decreases, whereas the soybean spot price adjusts faster to futures price decreases than futures price increases. Although this asymmetric adjustment is found for a single market in Ontario, Canada, the results may also provide insights on the spot‐futures price convergence issues in other commodity markets.