Commodity Futures Prices as Forecasts

William G. Tomek

Review of Agricultural Economics, 1997, vol. 19, issue 1, 23-44

Abstract: Futures markets provide contemporaneous price quotations for a constellation of contracts with maturities thirty or more months in the future, and a large literature exists about interpreting these prices as forecasts. Futures markets simultaneously determine a price level and price differences appropriate to contract temporal definitions. Futures prices can efficiently reflect a complex set of factors but still provide poor forecasts. Forecasts based on quantitative models cannot, however, improve on efficient futures prices as forecasting agents; empirical models provide as poor, if not poorer, forecasts. I discuss analogous ideas for basis forecasts.

Date: 1997
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