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Evaluating Potential Changes in Price Reporting Accuracy

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  • Ward, Clement E.
  • Choi, Seung-Churl

Abstract

Non-cash-market transactions for fed cattle have increased. Price discovery depends in part on the accuracy of reported cash market prices. Cattlemen and others have expressed concern that as non-cash-market transactions increase, reported cash market prices may no longer accurately reflect supply-demand conditions. Equations based on Chebyschev's inequality are used in conjunction with experimental market data from the Fed Cattle Market Simulator to explore relationships related to price reporting accuracy for several subpopulations of prices versus the known population. Price means and variances and distribution of prices were invariant to number of transaction prices. Mean prices and variance of prices also were invariant to number of observations. Only when the reduction in prices reached 80% was there a significant relationship between number of observations and two pairs of variables, i.e., reported price precision and confidence of a given level of precision. With the exception of the smallest reduction in transactions, no differences were found between the subpopulations and population for reported price precision versus probability of a given level of precision, for reported price precision versus estimated number of observations with a given degree of confidence, and for probability of a given level of precision versus estimated number of observations with a given level of precision. Results suggest the possibility that number of non-reported fed cattle transaction prices could increase significantly before the industry faces serious concerns regarding the accuracy of reported prices certis paribus.

Suggested Citation

  • Ward, Clement E. & Choi, Seung-Churl, 1998. "Evaluating Potential Changes in Price Reporting Accuracy," 1981-1999 Conference Archive 285721, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nc8191:285721
    DOI: 10.22004/ag.econ.285721
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    References listed on IDEAS

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    6. Anderson, John D. & Ward, Clement E. & Koontz, Stephen R. & Peel, Derrell S. & Trapp, James N., 1998. "Experimental Simulation Of Public Information Impacts On Price Discovery And Marketing Efficiency In The Fed Cattle Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 23(01), pages 1-17, July.
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    1. Franken, Jason & Parcell, Joe, 2011. "Evaluation of Market Thinness for Hogs and Pork," 2011 Conference, April 18-19, 2011, St. Louis, Missouri 285356, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

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