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Optimal Length of Moving Average to Forecast Futures Basis

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Author Info

  • Hatchett, Robert B.
  • Brorsen, B. Wade
  • Anderson, Kim B.

Abstract

The question addressed in this study is which length of historical moving average provides the best forecast of futures basis. Differences in observed forecast accuracy among the different moving averages are usually less than a cent per bushel, and most are not statistically significant. Further, the search for an optimal length of moving average may be futile since the optimal length depends on how much structural change has occurred. Our recommendation is to use moving averages when there has been no structural change and to use last year’s basis or an alternative approach if the forecaster perceives that a structural change has occurred.

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File URL: http://purl.umn.edu/61057
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Bibliographic Info

Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

Volume (Year): 35 (2010)
Issue (Month): 1 (April)
Pages:

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Handle: RePEc:ags:jlaare:61057

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Web page: http://waeaonline.org/
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Related research

Keywords: basis forecast; grain; Law of One Price; moving averages; structural change; Marketing;

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References

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  1. Townsend, John P. & Brorsen, B. Wade, 2000. "Cost Of Forward Contracting Hard Red Winter Wheat," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(01), April.
  2. Dabin Wang & William G. Tomek, 2007. "Commodity Prices and Unit Root Tests," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 873-889.
  3. Hyun Seok Kim & B. Wade Brorsen & Kim B. Anderson, 2010. "Profit Margin Hedging," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 638-653.
  4. Taylor, Mykel R. & Dhuyvetter, Kevin C. & Kastens, Terry L., 2004. "Incorporating Current Information Into Historical-Average-Based Forecasts To Improve Crop Price Basis Forecasts," 2004 Conference, April 19-20, 2004, St. Louis, Missouri 19022, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  5. Klumpp, Joni M. & Brorsen, B. Wade & Anderson, Kim B., 2007. "Determining Returns to Storage: Does Data Aggregation Matter," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 39(03), December.
  6. Chernov, Mikhail & Ronald Gallant, A. & Ghysels, Eric & Tauchen, George, 2003. "Alternative models for stock price dynamics," Journal of Econometrics, Elsevier, vol. 116(1-2), pages 225-257.
  7. B. Wade Brorsen & John Coombs & Kim Anderson, 1995. "The cost of forward contracting wheat," Agribusiness, John Wiley & Sons, Ltd., vol. 11(4), pages 349-354.
  8. Diaz, Edgar F. Pebe & Brorsen, B. Wade & Anderson, Kim B. & Richter, Francisca G.-C. & Kenkel, Philip L., 2002. "The Effect Of Rounding On The Probability Distribution Of Regrading In The U.S. Peanut Industry," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 20(1).
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Citations

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Cited by:
  1. Lee, Yoonsuk & Brorsen, B. Wade, 2012. "Impacts of Permanent and Transitory Shocks on Optimal Length of Moving Average to Predict Wheat Basis," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125001, Agricultural and Applied Economics Association.
  2. Marie Coiffard & Laëtitia Guilhot, 2012. "Migrations internationales : la mobilité des Hommes, facteur d'intégration régionale en Asie Orientale ?," Post-Print halshs-00755102, HAL.

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