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Impact of WASDE reports on implied volatility in corn and soybean markets

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  • Olga Isengildina-Massa

    (Department of Applied Economics and Statistics, Clemson University, 295 Barre Hall, Box 340313, Clemson, SC 29634)

  • Scott H. Irwin

    (Department of Agricultural and Consumer Economics, University of Illinois, Urbana-Champaign, IL 61801)

  • Darrel L. Good

    (Department of Agricultural and Consumer Economics, University of Illinois, Urbana-Champaign, IL 61801)

  • Jennifer K. Gomez

    (Department of Agricultural and Consumer Economics, University of Illinois, Urbana-Champaign, IL 61801)

Abstract

This study investigates the impact of U.S. Department of Agriculture World Agricultural Supply and Demand Estimate (WASDE) reports on implied volatility in corn and soybean markets over 1985 to 2002. If WASDE reports resolve uncertainty, implied volatility should drop immediately after release of the reports. Results show that WASDE reports lead to a statistically significant reduction of implied volatility that averages 0.7 percentage points for corn and 0.8 percentage points for soybeans. The magnitude of the reduction is largest for the group of WASDE reports containing both domestic and international situation and outlook information. This group of reports reduces implied volatility by an average of 1.1 percentage points in corn and by almost 1.5 percentage points in soybeans. Results also reveal that the market impact of WASDE reports is strongest in the most recent 1996 to 2002 subperiod. Overall, the results indicate that WASDE reports provide valuable information to corn and soybean market participants. [JEL classifications: Q100, Q110, Q130]. © 2008 Wiley Periodicals, Inc.

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Bibliographic Info

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

Volume (Year): 24 (2008)
Issue (Month): 4 ()
Pages: 473-490

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Handle: RePEc:wly:agribz:v:24:y:2008:i:4:p:473-490

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

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Cited by:
  1. Lihong Lu McPhail & Bruce A. Babcock, 2008. "Short-Run Price and Welfare Impacts of Federal Ethanol Policies," Center for Agricultural and Rural Development (CARD) Publications 08-wp468, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  2. Bozic, Marin & Fortenbery, T. Randall, 2011. "Pricing Options on Commodity Futures: The Role of Weather and Storage," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania, Agricultural and Applied Economics Association 103638, Agricultural and Applied Economics Association.
  3. Roberto Andreotti Bodra & Afonso De Campos Pint, 2014. "Modelo De Volatilidade Estocástica Com Saltos Aplicado A Commodities Agrícolas," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41th Brazilian Economics Meeting], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Gra 142, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].

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