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The Economics of Commodity Futures Markets: A Survey

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  • Gray, Roger W.
  • Rutledge, David J.S.

Abstract

This article reviews some of the literature pertaining to futures markets. After briefly considering how the evolution of the institution of futures trading has required changing interpretations, we devote a longer section to the interplay between theory and evidence concerning intertemporal price relationships. While disputed and inconclusive interpretations persist, Working's theory of the price of storage and his revision of hedging doctrine are clear landmarks of progress in understanding these price relationships. We deal separately with hedging theory; then with the relation between futures and price variability; and finally with the stochastic attributes of futures prices.

Suggested Citation

  • Gray, Roger W. & Rutledge, David J.S., 1971. "The Economics of Commodity Futures Markets: A Survey," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 39(04), December.
  • Handle: RePEc:ags:remaae:9639
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    File URL: http://purl.umn.edu/9639
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    References listed on IDEAS

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    1. Ronald I. McKinnon, 1967. "Futures Markets, Buffer Stocks, and Income Stability for Primary Producers," Journal of Political Economy, University of Chicago Press, vol. 75, pages 844-844.
    2. Tomek, William G., 1971. "A Note on Historical Wheat Prices and Futures Trading," Food Research Institute Studies, Stanford University, Food Research Institute, issue 01.
    3. Stevenson, Richard A & Bear, Robert M, 1970. "Commodity Futures: Trends or Random Walks?," Journal of Finance, American Finance Association, vol. 25(1), pages 65-81, March.
    4. Howell, L. D., 1948. "Analysis of Hedging and Other Operations in Grain Futures," Technical Bulletins 170308, United States Department of Agriculture, Economic Research Service.
    5. Stewart, Blair, 1949. "An Analysis of Speculative Trading in Grain Futures," Technical Bulletins 156265, United States Department of Agriculture, Economic Research Service.
    6. Gruen, Fred H.G., 1960. "The Pros and Cons of Futures Trading for Woolgrowers," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 28(03), September.
    7. F. W. Taussig, 1921. "Is Market Price Determinate?," The Quarterly Journal of Economics, Oxford University Press, vol. 35(3), pages 394-411.
    8. Lester G. Telser, 1958. "Futures Trading and the Storage of Cotton and Wheat," Journal of Political Economy, University of Chicago Press, vol. 66, pages 233-233.
    9. Howell, L. D. & Watson, Leonard J., 1938. "Relation of Spot Cotton Prices to Prices of Futures Contracts and Protection Afforded by Trading in Futures," Technical Bulletins 166018, United States Department of Agriculture, Economic Research Service.
    10. Smidt, Seymour, 1965. "A Test of the Serial Independence Price Changes in Soybean Futures," Food Research Institute Studies, Stanford University, Food Research Institute, issue 02.
    11. Powers, Mark J, 1970. "Does Futures Trading Reduce Price Fluctuations in the Cash Markets?," American Economic Review, American Economic Association, vol. 60(3), pages 460-464, June.
    12. Brand, Simon S., 1964. "The Decline in the Cotton Futures Market," Food Research Institute Studies, Stanford University, Food Research Institute, issue 03.
    13. J. Marvin Skadberg & Gene A. Futrell, 1966. "An Economic Appraisal of Futures Trading in Livestock," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 48(5), pages 1485-1489.
    14. Brinegar, Claude S., 1970. "A Statistical Analysis of Speculative Price Behavior," Food Research Institute Studies, Stanford University, Food Research Institute.
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    Cited by:

    1. Sooy, Jeff & Branch, Ben, 0. "A Study Of The Economic Functions Of The Maine Potato Futures Market," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 9(1:).
    2. Runge, C. Ford, 2006. "Agricultural Economics: A Brief Intellectual History," Staff Papers 13649, University of Minnesota, Department of Applied Economics.
    3. Gary B. Gorton & Fumio Hayashi & K. Geert Rouwenhorst, 2013. "The Fundamentals of Commodity Futures Returns," Review of Finance, European Finance Association, vol. 17(1), pages 35-105.
    4. Liu, Hsiang-Hsi, 1983. "An annual simultaneous equation econometric model of U.S. corn and soybean cash and futures markets," ISU General Staff Papers 198301010800009935, Iowa State University, Department of Economics.
    5. Watson, Alistair S., 1980. "Wool In 1980," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 24(02), August.
    6. Kenyon, David E. & Kingsley, Steven E., 1973. "An Analysis Of Anticipatory Short Hedging Using Predicted Harvest Basis," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 5(01), July.
    7. Mendez Parra, Maximiliano, 2015. "Seasonal Unit Roots and Structural Breaks in agricultural time series: Monthly exports and domestic supply in Argentina," MPRA Paper 63831, University Library of Munich, Germany, revised 06 Apr 2015.
    8. Schnake, Kristin N. & Karali, Berna & Dorfman, Jeffrey H., 2012. "The Informational Content of Distant-Delivery Futures Contracts," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 37(2), August.
    9. Christine Ennew & Wyn Morgan & Tony Rayner, 1992. "Role of attitudes in the decision to use futures markets: The case of the London potato futures market," Agribusiness, John Wiley & Sons, Ltd., vol. 8(6), pages 561-573.
    10. Vollink, William James, 1977. "An analysis of basis value determination for live beef cattle," ISU General Staff Papers 1977010108000018132, Iowa State University, Department of Economics.
    11. Langley, James A., 1983. "Regional acreage response functions for major US field crops: estimation and policy implications," ISU General Staff Papers 198301010800008678, Iowa State University, Department of Economics.
    12. C. T. Ennew & C. W. Morgan & A. J. Rayner, 1992. "Objective And Subjective Influences On The Decision To Trade On The London Potato Futures Market," Journal of Agricultural Economics, Wiley Blackwell, vol. 43(2), pages 160-174.

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