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Price Discovery in European Agricultural Markets: When Do Futures Contracts Matter?

Philipp Adämmer and Martin T. Bohl

No 4415, CQE Working Papers from Center for Quantitative Economics (CQE), University of Muenster

Abstract: The literature on price discovery in agricultural markets is predominantly devoted to North America. This paper extends the analysis to Europe to investigate the influence of futures markets on the pricing process during periods of price turmoil and rising trading activity. By quantifying the contribution of the futures market to price discovery over time, we show that its impact was high during the first period of price spikes (2007 to 2009) but lower during the second one (2010 to 2013). These results are noteworthy as trading volume in futures markets was low during the first period but high during the latter. More liquidity did thus not lead to a higher influence on spot prices. We argue that futures markets especially mattered for price discovery during the period of unanticipated price shocks, namely between 2007 and 2009.

Keywords: Price Discovery; European Agricultural Markets; Common Factor Weights; Time-Varying VECM (search for similar items in EconPapers)
JEL-codes: G10 G12 G13 Q10 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2015-12
New Economics Papers: this item is included in nep-agr and nep-mst
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