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Grain Price Expectations of Illinois Farmers and Grain Merchandisers

Author

Listed:
  • James S. Eales
  • Brian K. Engel
  • Robert J. Hauser
  • Sarahelen R. Thompson

Abstract

The study's purpose is to measure the extent to which futures and option prices reflect the subjective price distribution of a subset of market participants, farmers, and grain merchandisers in Illinois. Findings suggest that in most instances the futures price is an appropriate proxy for expected price. However, volatilities implied by option premia usually overestimate the subjective variances of producers and merchandisers. These differences between individual and market expectations of variance are consistent with findings of overconfidence in the psychology literature and should be considered by analysts when making observations about hedging decisions and risk aversion.

Suggested Citation

  • James S. Eales & Brian K. Engel & Robert J. Hauser & Sarahelen R. Thompson, 1990. "Grain Price Expectations of Illinois Farmers and Grain Merchandisers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 701-708.
  • Handle: RePEc:oup:ajagec:v:72:y:1990:i:3:p:701-708.
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