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Cotton Price Risk Management across Different Countries

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  • Wang, Qizhi
  • Chidmi, Benaissa

Abstract

Cotton price relationships between major cotton producers and New York cotton December future price are investigated by the regression model, the VAR model and the error-correction model, the error-correction model generates the hedge ratios that display the largest value in size in most of the cases except Australia. The results indicate that the price relationships between US, China and Australia and New York Future market prices are much higher than the relationships between other cotton producers and New York Future market prices.

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Bibliographic Info

Paper provided by Southern Agricultural Economics Association in its series 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia with number 46762.

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Date of creation: 16 Jan 2009
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Handle: RePEc:ags:saeana:46762

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Keywords: cotton price; New York future market prices; the regression model; the VAR model; the error-correction model; Agribusiness; Agricultural Finance;

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  1. Protopapadakis, Aris & Stoll, Hans R, 1983. " Spot and Futures Prices and the Law of One Price," Journal of Finance, American Finance Association, vol. 38(5), pages 1431-55, December.
  2. Schweizer, Martin, 1999. "A guided tour through quadratic hedging approaches," SFB 373 Discussion Papers 1999,96, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  3. Baffes, John & Ajwad, Mohamed I., 1998. "Detecting price links in the world cotton market," Policy Research Working Paper Series 1944, The World Bank.
  4. Ditsch, Mark W. & Leuthold, Raymond M., 1996. "Evaluating The Hedging Potential Of The Lean Hog Futures Contract," ACE OFOR Reports 14769, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
  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, vol. 29(01), April.
  6. repec:wop:humbsf:1999-96 is not listed on IDEAS
  7. Mark W. Ditsch & Raymond M. Leuthold, 1996. "Evaluating the Hedging Potential of the Lean Hog Futures Contract," Finance 9609003, EconWPA.
  8. Lence, Sergio H. & Kimle, Kevin & Hayenga, Marvin L., 1992. "A Dynamic Minimum Variance Hedge," Staff General Research Papers 11414, Iowa State University, Department of Economics.
  9. Kling, Catherine L. & Sexton, Richard & Carman, Hoy, 1991. "Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery," Staff General Research Papers 1609, Iowa State University, Department of Economics.
  10. Bruce A. Babcock, 2008. "Breaking the Link between Food and Biofuels," Center for Agricultural and Rural Development (CARD) Publications 08-bp53, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  11. MacDonald, Ronald, 2000. "Concepts to Calculate Equilibrium Exchange Rates: An Overview," Discussion Paper Series 1: Economic Studies 2000,03, Deutsche Bundesbank, Research Centre.
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