Financialization of Agricultural Commodity Markets: Do Financial Data Help to Forecast Agricultural Prices?

Xiaoli Etienne

No 205124, 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California from Agricultural and Applied Economics Association

Abstract: The dramatic rise in commodity index investment have made many market analysts and researchers believe that commodity markets have undergone a financialization process that forged a closer link between commodity and financial markets. I empirically test whether this hypothesis is true in a forecasting context by using high-frequency financial data to forecast monthly US corn prices. Specific financial series examined include the Baltic Dry Index, the US exchange rate, the Standard and Poor’s 500 market index, the 3-month US Treasury bill interest rate, and crude oil futures prices. Using a recently developed statistical model that deals with mixed-frequency data, I find that while some improvements may be made when including high-frequency financial data in the forecasting model, the improvements in mean-squared prediction error and directional accuracy using such models are minimal, and that models generated from random walk and autoregressive models perform satisfactory well compared to more complicated models.

Keywords: Agribusiness; Agricultural and Food Policy; Agricultural Finance; Demand and Price Analysis; Marketing; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 35
Date: 2015-07
New Economics Papers: this item is included in nep-for
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Working Paper: Financialization of Agricultural Commodity Markets: Do Financial Data Help to Forecast Agricultural Prices (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea15:205124

DOI: 10.22004/ag.econ.205124

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