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Relative Forecasting and Hedging Efficiency of Agricultural Futures Markets in the European Union: Evidence for Slaughter Hog Contracts

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  • Loy, Jens-Peter

Abstract

The paper aims at analyzing the potentials for reducing income risk and income variation for slaughter hog producers in Germany and Holland by participating at futures markets in Amsterdam or Hannover. The relative market and hedging efficiency for the Amsterdam stock exchange markets is tested and the optimal hedge ratio is derived for minimizing risk and variance of slaughter hog gross margins (income). Relative market efficiency and a significant impact of hedging on income risk and variance can not be rejected. The results show that the optimal hedge ratio is smaller for variance compared to risk minimizing hedging strategy.

Suggested Citation

  • Loy, Jens-Peter, 2002. "Relative Forecasting and Hedging Efficiency of Agricultural Futures Markets in the European Union: Evidence for Slaughter Hog Contracts," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24849, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae02:24849
    DOI: 10.22004/ag.econ.24849
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    References listed on IDEAS

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    1. David E. A. Giles & Barry A. Goss, 1981. "Futures Prices As Forecasts Of Commodity Spot Prices: Live Cattle And Wool," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 25(1), pages 1-13, April.
    2. T. Randall Fortenbery & Hector O. Zapata, 1997. "An evaluation of price linkages between futures and cash markets for cheddar cheese," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 17(3), pages 279-301, May.
    3. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    4. Pennings, Joost M E & Pennings, Joost M E, 1997. "Verschiebung des Preisrisikos mit Hilfe von Terminkontrakten in der Agrarwirtschaft," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 46(10).
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    1. Svanidze, Miranda & Götz, Linde, 2019. "Determinants of spatial market efficiency of grain markets in Russia," Food Policy, Elsevier, vol. 89(C).

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