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Commodity Futures Prices As Forecasts


  • Tomek, William G.


Futures markets provide contemporaneous price quotations for a constellation of contracts, with maturities 30 or more months in the future, and a large literature exists about interpreting these prices as forecasts. It is often preferable to think of futures markets as determining a price level and price differences appropriate to the temporal definitions of the contracts. Futures prices can be efficient in reflecting a complex set of factors, but still be "poor" forecasters. Forecasts from quantitative models cannot improve upon efficient futures prices as forecasting agents; the models provide equally poor forecasts. Analogous ideas are discussed for basis forecasts.

Suggested Citation

  • Tomek, William G., 1996. "Commodity Futures Prices As Forecasts," Working Papers 127901, Cornell University, Department of Applied Economics and Management.
  • Handle: RePEc:ags:cudawp:127901

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    References listed on IDEAS

    1. Richard E. Just & Gordon C. Rausser, 1981. "Commodity Price Forecasting with Large-Scale Econometric Models and the Futures Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 63(2), pages 197-208.
    2. Rausser, Gordon C & Carter, Colin, 1983. "Futures Market Efficiency in the Soybean Complex," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 469-478, August.
    3. Blank, Steven C., 1989. "Research On Futures Markets: Issues, Approaches, And Empirical Findings," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(01), July.
    4. Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
    5. Richard G. Heifner, 1966. "The Gains from Basing Grain Storage Decisions on Cash-Future Spreads," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 48(5), pages 1490-1495.
    6. 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.
    7. Emmett Elam & Bruce L. Dixon, 1988. "Examining the validity of a test of futures market efficiency," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 8(3), pages 365-372, June.
    8. Avraham Kamara, 1982. "Issues in futures markets: A survey," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 2(3), pages 261-294, September.
    9. William G. Tomek & Roger W. Gray, 1970. "Temporal Relationships Among Prices on Commodity Futures Markets: Their Allocative and Stabilizing Roles," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 52(3), pages 372-380.
    10. Kahl, Kandice H. & Tomek, William G., 1986. "Forward-Pricing Models for Futures Markets: Some Statistical and Interpretative Issues," Food Research Institute Studies, Stanford University, Food Research Institute, issue 01.
    11. Bessler, David A. & Brandt, Jon A., 1992. "An analysis of forecasts of livestock prices," Journal of Economic Behavior & Organization, Elsevier, vol. 18(2), pages 249-263, July.
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