How market efficiency and the theory of storage link corn and ethanol markets

Mindy Mallory (), Scott Irwin and Dermot Hayes

Energy Economics, 2012, vol. 34, issue 6, 2157-2166

Abstract: This article uses the theories of market efficiency and supply of storage to develop a conceptual link between the corn and ethanol markets and explores statistical evidence for the link. We propose that a long-run no-profit condition is established in distant futures markets for ethanol, corn and natural gas and then use the theory of storage to define an inter-temporal equilibrium among these prices. The relationship shows that under certain conditions, future price expectations will influence nearby futures prices and that a short-term relationship between input and output prices will exist. We demonstrate validity of the theory using a structural price model and then by means of time-series techniques.

Keywords: Ethanol; Corn; Energy; Storage; Arbitrage; Cointegration; Futures; Price-analysis (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (49)

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Related works:
Working Paper: How Market Efficiency and the Theory of Storage Link Corn and Ethanol Markets (2010)
Working Paper: How Market Efficiency and the Theory of Storage Link Corn and Ethanol Markets (2010)
Working Paper: How Market Efficiency and the Theory of Storage Link Corn and Ethanol Markets (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:34:y:2012:i:6:p:2157-2166

DOI: 10.1016/j.eneco.2012.03.011

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