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Forecasting Prices at the Dutch Flower Auctions
Author(s) -
Steen Marie,
Gjølberg Ole
Publication year - 1999
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/j.1477-9552.1999.tb00812.x
Subject(s) - common value auction , economics , econometrics , autoregressive model , sample (material) , event (particle physics) , microeconomics , chemistry , physics , chromatography , quantum mechanics
Prices at the Dutch flower auctions are extremely volatile. Price changes of +/‐20 per cent one week to the next represents a normal event, and +/‐50 per cent is not uncommon. Since production planning in the flower business offers a complicated variation over the Newsboy Problem, good price forecasts would improve decision making on space allocation; what species to plant; the timing of harvesting, etc. This paper analyses weekly prices for three major species, i.e., roses, chrysanthemums and carnations, 1993–1996. We find that there are strong calendar regularities particularly for roses and chrysanthemums. Establishing a model in which we combine information on seasonal regularities and autoregressive price patterns, we manage to explain a substantial part of the short‐term price variability for all three species. The model is tested in an out‐of‐sample dynamic forecasting experiment during the first 35 weeks of 1997.