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Flexible Tests for USDA Report Announcement Effects in Futures Markets
Author(s) -
Ying Jiahui,
Chen Yu,
Dorfman Jeffrey H
Publication year - 2019
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aaz013
Subject(s) - futures contract , volatility (finance) , futures market , economics , econometrics , price discovery , financial economics , order (exchange) , finance
Abstract The value of USDA reports in commodity futures markets has been intensively researched, but statistical hypothesis tests have been limited by the sheer number of reports and the consequent need to limit parameters to be estimated. This has led most tests of USDA report announcement effects to be based on single coefficients for each report series. We relax the implicit assumption that a report series has a constant impact on futures price volatility or returns in two ways in order to introduce more flexible tests for announcement effects. First, we introduce a time trend into the impact of announcements on futures price volatility to determine if USDA reports are becoming more or less influential over time. Then we allow each report to have a different impact on futures price returns using Theil‐Goldberger mixed estimation. The results show that many, but not all, USDA reports have significant effects on corn and soybean futures market returns or volatility.