The effect of futures markets and corners on storage and spot price variability

When a futures market is introduced, the volume of storage should become more sensitive to changes in the return to storage. The increase in storage sensitivity means that storage will absorb a larger proportion of demand and supply shocks than it did previously, reducing spot price volatility. Data...

Full description

Saved in:
Bibliographic Details
Published in:American journal of agricultural economics 1995-02, Vol.77 (1), p.182-193
Main Author: Netz, J.S. (Purdue University.)
Format: Article
Language:English
Subjects:
Agricultural economics
Cash
COMERCIO
COMMERCE
Commodities
Commodity prices
corners
ETATS UNIS
EUA
Expected utility
Financial risk
Futures market
Futures markets
Futures trading
G130
Hedging
Inventory
MARCHE A TERME
Market prices
MODELE ECONOMETRIQUE
MODELOS ECONOMETRICOS
OPERACIONES A PLAZO
PRECIOS DE MERCADO
Price variance
Price volatility
PRIX DE MARCHE
Profits
Q110
Q130
RIESGO
Risk aversion
RISQUE
Shipments
Stock exchanges
Storage
Supply
Volatility
Citations: Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:When a futures market is introduced, the volume of storage should become more sensitive to changes in the return to storage. The increase in storage sensitivity means that storage will absorb a larger proportion of demand and supply shocks than it did previously, reducing spot price volatility. Data from the Chicago Board of Trade support the hypotheses of increased storage sensitivity and reduced spot price volatility. The effect of futures on spot price volatility is sensitive to the competitive structure of the futures market. Futures market manipulation causes spot price variance to increase. Despite manipulation, the development of the wheat futures market caused the coefficient of variation of spot price to decline significantly.
ISSN:0002-9092
1467-8276
DOI:10.2307/1243900