Hedging Effectiveness Around U.S. Department of Agriculture Crop Reports
It is well documented that â€˜â€˜unanticipatedâ€™â€™ information contained in United States Department of Agriculture (USDA) crop reports induces large price reactions in corn and soybean markets. Thus, a natural question that arises from this literature is: To what extent are futures hedges able to remove or reduce increased price risk around report release dates? This paper addresses this question by simulating daily futures returns, daily cash returns, and daily hedged returns around report release dates for two storable commodities (corn and soybeans) in two market settings (North Central Illinois and Memphis, Tennessee). Various risk measures, including â€˜â€˜Value at Risk,â€™â€™ are used to determine hedging effectiveness, and â€˜â€˜Analysis of Varianceâ€™â€™ is used to uncover the underlying factors that contribute to hedging effectiveness.
Volume (Year): 43 (2011)
Issue (Month): 01 (February)
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