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Measuring the Influence of Commodity Fund Trading on Soybean Price Discovery

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  • Plato, Gerald E.
  • Hoffman, Linwood A.

Abstract

The increase in commodity fund trading in the agricultural commodity futures markets has raised concern that this trading is degrading the price discovery performance of these markets. We used the Beveridge-Nelson Decomposition procedure to estimate the price discovery performance of the soybean futures and spot markets. We found that the price discovery performance of the soybean futures market has improved along with the increased commodity fund trading. Our results indicated that a portion of the price discovered in the soybean futures market is passed to the spot market.

Suggested Citation

  • Plato, Gerald E. & Hoffman, Linwood A., 2007. "Measuring the Influence of Commodity Fund Trading on Soybean Price Discovery," 2007 Conference, April 16-17, 2007, Chicago, Illinois 37568, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nccsci:37568
    DOI: 10.22004/ag.econ.37568
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    References listed on IDEAS

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    1. Beveridge, Stephen & Nelson, Charles R., 1981. "A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the `business cycle'," Journal of Monetary Economics, Elsevier, vol. 7(2), pages 151-174.
    2. Evans, George & Reichlin, Lucrezia, 1994. "Information, forecasts, and measurement of the business cycle," Journal of Monetary Economics, Elsevier, vol. 33(2), pages 233-254, April.
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    Cited by:

    1. Etienne, Xiaoli L. & Hoffman, Linwood A., 2015. "Price Discovery and Risk Management in the U.S. Distiller’s Grain Markets," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205125, Agricultural and Applied Economics Association.

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