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Futures Basis of RSS3 in the Agricultural Futures Exchange of Thailand

Author

Listed:
  • Tarntip Boonkomrat

    () (Thanachart Bank, Pathum Wan, Bangkok, Thailand)

  • Kanokwan Chancharoenchai

    () (Faculty of Economics, Kasetsart University, Bangkok, Thailand)

Abstract

Ribbed smoked rubber sheet no.3 (RSS3) is one of the agricultural commodities in the Agricultural Futures Exchange of Thailand (AFET). Recently, its futures basis has shown volatile behavior. This could reflect its inefficiency as a hedging tool and the inefficiency in AFET itself. This research examines the predictive power of some economic factors. The monthly data during June 2004 to October 2008 were used in the multiple regression analysis. The findings give evidence of statistically significant explanatory powers of the market and macroeconomic information in estimating the futures basis. The AFET could thus be categorized as semi-strong efficiency form of price. The efficiency could be increased by the effective dissemination of knowledge and information to investors to support their investment decision. In addition, the agricultural price risk should be managed through market-based tools.

Suggested Citation

  • Tarntip Boonkomrat & Kanokwan Chancharoenchai, 2011. "Futures Basis of RSS3 in the Agricultural Futures Exchange of Thailand," Applied Economics Journal, Kasetsart University, Faculty of Economics, Center for Applied Economic Research, vol. 18(1), pages 15-30, June.
  • Handle: RePEc:aej:apecjn:v:18:y:2011:i:1:p:15-30
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    More about this item

    Keywords

    futures basis; RSS3; AFET;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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