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Hedging Effectiveness around USDA Crop Reports

Andrew McKenzie and Navinderpal Singh

No 37617, 2008 Conference, April 21-22, 2008, St. Louis, Missouri from NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: It is well documented that “unanticipated” information contained in USDA crop reports induces large price reactions in corn and soybean markets. Thus, a natural question that arises from this literature is: To what extent are futures hedges able to remove or reduce increased price risk around report release dates? This paper addresses this question by simulating daily futures returns, daily cash returns and daily hedged returns around report release dates for two storable commodities (corn and soybeans) in two market settings (North Central Illinois and Memphis Tennessee). Various risk measures, including “Value at Risk,” are used to determine hedging effectiveness, and “Analysis of Variance” is used to uncover the underlying factors that contribute to hedging effectiveness.

Keywords: Agricultural; Finance (search for similar items in EconPapers)
Pages: 17
Date: 2008
New Economics Papers: this item is included in nep-rmg
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https://ageconsearch.umn.edu/record/37617/files/confp17-08.pdf (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:nccest:37617

DOI: 10.22004/ag.econ.37617

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