The Informational Content of Distant-Delivery Futures Contracts

Kristin N. Schnake and Berna Karali

No 285347, 2011 Conference, April 18-19, 2011, St. Louis, Missouri from NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: The futures markets have two main goals: price discovery and risk management. Because management decisions often have to be made on a time horizon longer than the time until expiration of the nearby futures contract, the question of distant-delivery futures contracts’ ability to assist in price discovery is important. We focus on soybean and live cattle distantdelivery futures contracts and test for the informational value added to nearby contracts. Two tests for information value provide partially conflicting results due to the different information measures employed. If being able to predict the price trend is sufficient, then we find some information value in distant-delivery futures contracts, while if accurate point estimates of future spot prices are desired the results are negative. Surprisingly, we do not find the expected dichotomy between the storable (soybeans) and non-storable (cattle) commodities.

Keywords: Marketing (search for similar items in EconPapers)
Date: 2011-04
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nccc11:285347

DOI: 10.22004/ag.econ.285347

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