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Forecasting Cattle Prices in the Presence of Structural Change

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  • Goodwin, Barry K.

Abstract

Recent empirical research and developments in the cattle industry suggest several reasons to suspect structural change in economic relationships determining cattle prices. Standard forecasting models may ignore structural change and may produce biased and misleading forecasts. Vector autoregressive (VAR) models that allow parameters to vary with time are used to forecast quarterly cattle prices. The VAR procedures are flexible in that they allow the identification of structural change that begins at an a priori unknown point and occurs gradually. The results indicate that the lowest RMSE for out-of-sample forecasts of cattle prices is obtained using a gradually switching VAR model. However, differences between the gradually switching VAR model and a univariate ARIMA model are not strongly significant. Impulse response functions indicate that adjustments of cattle prices to new information have become faster in recent years.

Suggested Citation

  • Goodwin, Barry K., 1992. "Forecasting Cattle Prices in the Presence of Structural Change," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 24(2), pages 11-22, December.
    • Handle: RePEc:cup:jagaec:v:24:y:1992:i:02:p:11-22_01
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    Cited by:

    1. Kastens, Terry L. & Schroeder, Ted C., 1993. "Expectations of Cattle Feeding Investors in Feeder Cattle Placements," Staff Papers 118159, Kansas State University, Department of Agricultural Economics.
    2. Guney, Selin, 2015. "An evaluation of price forecasts of the cattle market under structural changes," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205109, Agricultural and Applied Economics Association.
    3. Tejeda, Hernan A., 2012. "Time-Varying Price Interactions and Risk Management in Livestock Feed Markets – Determining the Ethanol Surge Effect," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124956, Agricultural and Applied Economics Association.
    4. Franken, Jason R.V. & Parcell, Joe L. & Sykuta, Michael E. & Fulcher, Christopher L., 2005. "Market Integration: Case Studies of Structural Change," Agricultural and Resource Economics Review, Cambridge University Press, vol. 34(2), pages 163-172, October.
    5. Adams, Jaime Coakley & MacNair, Douglas J. & Bingham, Matthew F. & Hostetter, Leigh, 2003. "Peach Prices In California In The Presence Of Technological Change In The Agricultural Pesticide Industry," 2003 Annual meeting, July 27-30, Montreal, Canada 22089, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Kastens, Terry L. & Schroeder, Ted C., 1994. "Cattle Feeder Behavior And Feeder Cattle Placements," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(2), pages 1-12, December.

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