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Out‐of‐sample testing price discovery in commodity markets: the case of soybeans
Author(s) -
Ahumada Hildegart,
Cornejo Magdalena
Publication year - 2016
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/agec.12267
Subject(s) - futures contract , price discovery , economics , spot contract , sample (material) , econometrics , financial economics , commodity , normal backwardation , multivariate statistics , forward market , futures market , statistics , mathematics , finance , chemistry , chromatography
Price discovery, a central function of futures markets, has been usually tested in‐sample by studying the common stochastic trend between spot and futures prices. Instead, to evaluate futures as anticipatory prices, we develop a forecast approach to out‐of‐sample test price discovery in a multivariate framework. We apply it to the soybeans market. Results indicate futures prices as the best available “predictors” of future spot prices, although this finding holds only on average and for certain periods, other models show forecasting gains.