How Market Efficiency and the Theory of Storage Link Corn and Ethanol Markets

Mindy L. Mallory, Dermot Hayes and Scott H. Irwin

No 97611, Hebrew University of Jerusalem Archive from Hebrew University of Jerusalem

Abstract: In this article we use the theories of market efficiency and supply of storage to develop a conceptual link between the corn and ethanol markets and explore 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 current spot prices and that a short-term relationship between input and output prices will exist. This short-term relationship will contain fixed costs. We demonstrate validity of the theory using a structural price model and then by means of time-series techniques.

Keywords: Crop Production/Industries; Demand and Price Analysis; Marketing; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 42
Date: 2010-12
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/97611/files/10-WP_517.pdf (application/pdf)

Related works:
Journal Article: How market efficiency and the theory of storage link corn and ethanol markets (2012)
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)
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:ags:hebarc:97611

DOI: 10.22004/ag.econ.97611

Access Statistics for this paper

More papers in Hebrew University of Jerusalem Archive from Hebrew University of Jerusalem
Bibliographic data for series maintained by AgEcon Search ().