PRICE DISCOVERY IN THINLY TRADED MARKETS: CASH AND FUTURES RELATIONSHIPS IN BRAZILIAN AGRICULTURAL FUTURES MARKETS

Fabio Mattos and Philip Garcia

No 19019, 2004 Conference, April 19-20, 2004, St. Louis, Missouri from NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: This study investigates the relationship between cash and futures prices in the Brazilian agricultural market, focusing on the effects of trading activity on the price discovery mechanism of futures markets. The results are mixed, but several points begin to emerge. In general, higher trading activity is linked to the presence of long-run equilibrium relationships between cash and futures prices. In these cases, futures prices appear to play a more dominant role in the pricing process. In more lightly traded markets, neither long-run relationships nor short-run leads and lags can be found. Where short-run interactions exist, they are simultaneous in nature but weak. Overall, our findings suggest that the level of market activity necessary to develop interactive cash and futures markets is surprisingly small.

Keywords: Marketing (search for similar items in EconPapers)
Pages: 18
Date: 2004
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:ncrfou:19019

DOI: 10.22004/ag.econ.19019

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