The impact of public and semi-public information on cotton futures market

R. Xie, O. Isengildina-Massa, Gerald Dwyer and J. L. Sharp
Authors registered in the RePEc Author Service: Olga Isengildina Massa

Applied Economics, 2016, vol. 48, issue 36, 3416-3431

Abstract: This study estimated the impact of all major public and semi-public reports on the cotton futures market from 1995 through 2012. The estimation was based on the event study approach with the events measured by the release of five major reports: Export Sales, Crop Progress, World Agricultural Supply and Demand Estimates (WASDE) and Prospective Plantings (public reports from US Department of Agriculture) and Cotton This Month (semi-public report from International Cotton Advisory Committee). The best-fitting IGARCH(1,1)-t model that accounted for the day-of-week, seasonality and stock levels was used to measure the report effects on daily nearby cotton close-to-close futures returns. Prospective Plantings and WASDE reports appeared to be the most important sources of information in the cotton markets moving the conditional standard deviation of returns by an average of 14.4 and 9.6 percentage points, respectively. However, significant market reaction was not found for the other three reports. Our analysis revealed that, in the presence of clustering, ignoring the impact of other reports would have resulted in about 18% overestimation of WASDE impact.

Date: 2016
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DOI: 10.1080/00036846.2016.1139677

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