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Estimating the Structure of Market Reaction to News: Information Events and Lumber Futures Prices

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  • Randal R. Rucker
  • Walter N. Thurman
  • Jonathan K. Yoder

Abstract

We develop a new event-study technique, the distributional event response model (DERM), appropriate to relatively slowly evolving information events. We apply the model to twelve years of daily lumber futures prices and analyze the effects of three different types of information releases: (a) monthly housing starts estimates, (b) aperiodic administrative and judicial announcements about U.S.-Canada trade disputes, and (c) novel and unprecedented court decisions related to the Endangered Species Act (ESA). The information releases are different in ways that predict their relative speeds of impoundment in prices. We find that housing start events are absorbed more quickly than trade events, which are absorbed more quickly than ESA events. Copyright 2005, Oxford University Press.

Suggested Citation

  • Randal R. Rucker & Walter N. Thurman & Jonathan K. Yoder, 2005. "Estimating the Structure of Market Reaction to News: Information Events and Lumber Futures Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 482-500.
  • Handle: RePEc:oup:ajagec:v:87:y:2005:i:2:p:482-500
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2005.00736.x
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    Cited by:

    1. Ye, Shiyu & Karali, Berna & Ramirez, Octavio A., 2014. "Event Study of Energy Price Volatility: An Application of Distributional Event Response Model," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170207, Agricultural and Applied Economics Association.
    2. Wolfram Schlenker & Sofia B. Villas-Boas, 2009. "Consumer and Market Responses to Mad Cow Disease," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 1140-1152.
    3. Kentaka Aruga, 2014. "An intervention analysis on the Tokyo Grain Exchange non-genetically modified and conventional soybean futures markets," Cogent Economics & Finance, Taylor & Francis Journals, vol. 2(1), pages 1-11, December.
    4. Almánzar, Miguel & Torero, Máximo & Grebmer, Klaus von, 2013. "Futures Commodities Prices and Media Coverage," Discussion Papers 149414, University of Bonn, Center for Development Research (ZEF).
    5. Berna Karali & Walter N. Thurman, 2009. "Announcement effects and the theory of storage: an empirical study of lumber futures," Agricultural Economics, International Association of Agricultural Economists, vol. 40(4), pages 421-436, July.
    6. Niquidet, Kurt, 2008. "Revitalized? An event study of forest policy reform in British Columbia," Journal of Forest Economics, Elsevier, vol. 14(4), pages 227-241, November.
    7. repec:eee:foreco:v:28:y:2017:i:c:p:70-79 is not listed on IDEAS
    8. repec:eee:jbfina:v:91:y:2018:i:c:p:70-85 is not listed on IDEAS
    9. Sun, Xing & Zhang, Daowei, 2011. "An event analysis of industrial timberland sales on shareholder values of major U.S. forest products firms," Forest Policy and Economics, Elsevier, vol. 13(5), pages 396-401, June.
    10. José Juan Cáceres-Hernández & Gloria Martín-Rodríguez, 2007. "Heterogeneous Seasonal Patterns in Agricultural Data and Evolving Splines," The IUP Journal of Agricultural Economics, IUP Publications, vol. 0(3), pages 48-65, July.
    11. Sun, Changyou & Liao, Xianchun, 2011. "Effects of litigation under the Endangered Species Act on forest firm values," Journal of Forest Economics, Elsevier, vol. 17(4), pages 388-398.

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