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The Informational Content of Distant-Delivery Futures Contracts

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  • Schnake, Kristin N.
  • Karali, Berna

Abstract

The futures markets have two main goals: price discovery and risk management. Because management decisions often have to be made on a time horizon longer than the time until expiration of the nearby futures contract, the question of distant-delivery futures contracts’ ability to assist in price discovery is important. We focus on soybean and live cattle distantdelivery futures contracts and test for the informational value added to nearby contracts. Two tests for information value provide partially conflicting results due to the different information measures employed. If being able to predict the price trend is sufficient, then we find some information value in distant-delivery futures contracts, while if accurate point estimates of future spot prices are desired the results are negative. Surprisingly, we do not find the expected dichotomy between the storable (soybeans) and non-storable (cattle) commodities.

Suggested Citation

  • Schnake, Kristin N. & Karali, Berna, 2011. "The Informational Content of Distant-Delivery Futures Contracts," 2011 Conference, April 18-19, 2011, St. Louis, Missouri 285347, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nccc11:285347
    DOI: 10.22004/ag.econ.285347
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    References listed on IDEAS

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