Energy and agricultural commodities revealed through hedging characteristics: Evidence from developing and mature markets

Simon Spencer, Don Bredin and Thomas Conlon

Journal of Commodity Markets, 2018, vol. 9, issue C, 1-20

Abstract: What can we learn about a physical commodity by studying its hedging characteristics? We use a hedging study to shed light on important properties of ethanol (a developing market) and corn (a mature market). Our three primary contributions are empirical, with implications for all storable commodities. We identify important differences between regularly cited data sets for spot ethanol prices and clearly explain these differences in terms of the data collection methodology. The data selection implications for hedge effectiveness are found to be substantial. Having provided clarity on the data, we find consistent evidence to support the simple is better hypothesis in relation to futures hedging models. Finally we caution against complacency, as our methodology reveals how extreme events can lead to biases which reduce the hedge effectiveness at the very times when effective hedges are most needed.

Keywords: Futures hedging; Corn; Ethanol; Renewable fuel standard; Data set choice; Model choice; 2013 Corn harvest (search for similar items in EconPapers)
JEL-codes: G13 G18 Q02 Q40 Q42 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S2405851317301083
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:9:y:2018:i:c:p:1-20

DOI: 10.1016/j.jcomm.2017.12.001

Access Statistics for this article

Journal of Commodity Markets is currently edited by Marcel Prokopczuk, Betty Simkins and Sjur Westgaard

More articles in Journal of Commodity Markets from Elsevier
Bibliographic data for series maintained by Catherine Liu ().