 Futures Markets and Spot Price Volatility: A Case StudyC. W. Morgan Journal of Agricultural Economics, 1999, vol. 50, issue 2, 247-257 Abstract: Futures markets, where they exist, can play a crucial role in determining the storage decision in the underlying spot (physical) market. The futures market acts as a conduit for market information and is a gatherer of agents' expectations about the future prospects for the spot market. As such, it is able to provide both price insurance and price discovery roles, the latter of which generates information for spot market traders and allows them to make rational storage decisions. If this were to be the case, then the efficiency of storage is improved which can potentially lead to a reduction in the volatility of spot prices over the marketing season. The existing literature is ambiguous as to whether futures markets can help spot markets price more efficiently. This paper seeks to examine whether this is the case in the British maincrop potato market by evaluating the volatility of spot prices over the period 1969–96 in a “before‐after” analysis of the impact of the introduction of futures trading in 1980. The results suggest that the introduction of the futures market has led to a reduction in price volatility, despite some problems in the operation of the futures market itself. Date: 1999 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:jageco:v:50:y:1999:i:2:p:247-257 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Agricultural Economics is currently edited by David Harvey More articles in Journal of Agricultural Economics from Wiley Blackwell |
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