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The hedging performance in new agricultural futures markets: A note

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Author Info

  • Joost M. E. Pennings

    (Department of Marketing and Marketing Research, Wageningen Agricultural University, Wageningen, The Netherlands)

  • Matthew T. G. Meulenberg

    (Department of Marketing and Marketing Research, Wageningen Agricultural University, Wageningen, The Netherlands)

Abstract

Agribusiness companies and farmers must cope with the risk of price changes when buying or selling agricultural commodities. Hedging price risk with agricultural commodity futures offers a way of minimizing this risk. Information is needed on the hedging effectiveness of these futures. Because many new agricultural futures markets, especially those in Europe, are thin markets, hedgers face liquidity risks which have to be taken into account when evaluating hedging effectiveness. © 1997 John Wiley & Sons, Inc.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 13 (1997)
Issue (Month): 3 ()
Pages: 295-300

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Handle: RePEc:wly:agribz:v:13:y:1997:i:3:p:295-300

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Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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References

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  1. Ederington, Louis H, 1979. "The Hedging Performance of the New Futures Markets," Journal of Finance, American Finance Association, American Finance Association, vol. 34(1), pages 157-70, March.
  2. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, Econometric Society, vol. 53(6), pages 1315-35, November.
  3. Dennis M. Conley, 1994. "Hedging ratios and effectiveness for diesel fuel and gasoline the northern plains," Agribusiness, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 10(4), pages 305-317.
  4. Franckle, Charles T, 1980. " The Hedging Performance of the New Futures Markets: Comment," Journal of Finance, American Finance Association, American Finance Association, vol. 35(5), pages 1273-79, December.
  5. Thompson, Sarahelen R. & Eales, James S. & Seibold, David, 1993. "Comparison Of Liquidity Costs Between The Kansas City And Chicago Wheat Futures Contracts," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 18(02), December.
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Citations

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Cited by:
  1. Parcell, Joseph L., 2002. "Emerging Ip Markets: The Tokyo Grain Exchange Non-Gmo Soybean Contract," Working Papers, University of Missouri Columbia, Department of Agricultural Economics 26038, University of Missouri Columbia, Department of Agricultural Economics.
  2. Sanders, Dwight R. & Greer, Tracy D., 2002. "Hedging Spot Corn: An Examination Of The Minneapolis Grain Exchange'S Cash Settled Corn Contract," 2002 Conference, April 22-23, 2002, St. Louis, Missouri, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management 19064, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  3. Manfredo, Mark R. & Sanders, Dwight R., 2003. "Minimum Variance Hedging And The Encompassing Principle: Assessing The Effectiveness Of Futures Hedges," 2003 Annual meeting, July 27-30, Montreal, Canada, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 22247, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Joost M.E. Pennings & Raymond M. Leuthold, 1999. "Commodity Futures Contract Viability: A Multidisciplinary Approach," Finance, EconWPA 9905002, EconWPA.
  5. Sanders, Dwight R. & Manfredo, Mark R., 2004. "Comparing Hedging Effectiveness: An Application of the Encompassing Principle," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 29(01), April.
  6. Kuwornu, John K.M. & Kuiper, W. Erno & Pennings, Joost M.E. & Meulenberg, Matthew T.G., 2006. "Risk Management Using Futures Contracts: The Impact of Spot Market Contracts and Production Horizons on the Optimal Hedge Ratio," 99th Seminar, February 8-10, 2006, Bonn, Germany, European Association of Agricultural Economists 7755, European Association of Agricultural Economists.
  7. Quintino, Derick David & David, Sergio Adriani, 2013. "Quantitative analysis of feasibility of hydrous ethanol futures contracts in Brazil," Energy Economics, Elsevier, Elsevier, vol. 40(C), pages 927-935.
  8. Parcell, Joseph L., 2002. "Emerging Ip Markets: The Tokyo Grain Exchange Non-Gmo Soybean Contract," 2002 Conference, April 22-23, 2002, St. Louis, Missouri, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management 19058, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

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