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Empirical tests of a simple pricing model for sugar futures

Author

Listed:
  • Nijman, T.E.

    (Tilburg University, School of Economics and Management)

  • Beetsma, R.M.W.J.

Abstract

In this paper we test the empirical implications of a simple pricing model for commodity futures for the marginal process of prices of sugar futures. According to the pricing model, the futures price bias depends linearly on the conditional variance. We find significant coefficients, from monthly as well as daily data, if the conditional variance is modelled using the GARCH-M model. These estimates imply contango in the futures marked and a net hedging demand on the long side of it.
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Suggested Citation

  • Nijman, T.E. & Beetsma, R.M.W.J., 1993. "Empirical tests of a simple pricing model for sugar futures," Other publications TiSEM dd35375b-390f-42fe-97e5-b, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:dd35375b-390f-42fe-97e5-b5865c6556c9
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    2. Karl Wärneryd, 1993. "Anarchy, Uncertainty, And The Emergence Of Property Rights," Economics and Politics, Wiley Blackwell, vol. 5(1), pages 1-14, March.
    3. Muto, S., 1994. "On licensing policies in Bertrand competition," Other publications TiSEM ef5dd5db-f744-4695-b669-3, Tilburg University, School of Economics and Management.
    4. Nijman, T.E. & Palm, F.C., 1991. "Recent Developments in Modeling Volatility in Financial Data," Papers 9168, Tilburg - Center for Economic Research.

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