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Volatility in Wheat Spot and Futures Markets, 1950–1993: Government Farm Programs, Seasonality, and Causality
Author(s) -
CRAIN SUSAN J.,
LEE JAE HA
Publication year - 1996
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1996.tb05211.x
Subject(s) - volatility (finance) , futures contract , allotment , economics , futures market , financial economics , spot market , spot contract , volatility swap , monetary economics , business , implied volatility , market economy , electricity , electrical engineering , engineering
We explore how wheat spot and futures market volatility has been impacted by government farm programs during the 1950–1993 period. We find that changing volatility in both markets is highly associated with changing farm programs. The mandatory allotment programs of the 1950s and early 1960s (1/3/50–4/10/64) were associated with low volatility, while the voluntary programs initiated in the mid 1960s seem to have induced high volatility (4/11/64–12/22/85). Both market‐driven loan rates and conservation reserve programs appear to have helped volatility revert to lower levels since the mid 1980s (12/23/85–12/30/93). We also examine seasonality and causality in conjunction with the farm programs.