Optimal Length of Moving Average to Forecast Futures Basis

Robert B. Hatchett, B Brorsen and Kim B. Anderson

No 53048, 2009 Conference, April 20-21, 2009, St. Louis, Missouri from NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: Futures prices when combined with a basis forecast provide a reliable way to forecast cash prices. The most popular method of forecasting basis is historical moving averages. Given the recent failure of longer moving averages proposed by previous studies, this research reassesses past recommendations about the best length of moving average to use in forecasting basis. This research compares practical preharvest and storage period basis forecasts for hard wheat, soft wheat, corn and soybeans to identify the optimal amount of historical information to include in moving average forecasts. Only with preharvest hard wheat forecasts are the best moving averages longer than 3 years. The differences in forecast accuracy among the different moving averages are small and in most cases the differences are not statistically significant. The recommendation is to use longer moving averages during time periods (or at locations) when there have been no structural changes and use last year’s basis after it appears that a structural change has occurred.

Keywords: Agribusiness; Agricultural and Food Policy; Agricultural Finance; Crop Production/Industries; Farm Management; Financial Economics; Marketing; Research Methods/ Statistical Methods; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 24
Date: 2009-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://ageconsearch.umn.edu/record/53048/files/confp14-09.pdf (application/pdf)

Related works:
Journal Article: Optimal Length of Moving Average to Forecast Futures Basis (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:nccc09:53048

DOI: 10.22004/ag.econ.53048

Access Statistics for this paper

More papers in 2009 Conference, April 20-21, 2009, St. Louis, Missouri from NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().