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Optimal Length of Moving Average to Forecast Futures Basis

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  • Hatchett, Robert B.
  • Brorsen, B. Wade
  • Anderson, Kim B.

Abstract

The question addressed in this study is which length of historical moving average provides the best forecast of futures basis. Differences in observed forecast accuracy among the different moving averages are usually less than a cent per bushel, and most are not statistically significant. Further, the search for an optimal length of moving average may be futile since the optimal length depends on how much structural change has occurred. Our recommendation is to use moving averages when there has been no structural change and to use last year’s basis or an alternative approach if the forecaster perceives that a structural change has occurred.

Suggested Citation

  • Hatchett, Robert B. & Brorsen, B. Wade & Anderson, Kim B., 2010. "Optimal Length of Moving Average to Forecast Futures Basis," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 35(1), pages 1-16.
    • Handle: RePEc:ags:jlaare:61057
    DOI: 10.22004/ag.econ.61057
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    2. Lee, Yoonsuk & Brorsen, B. Wade, 2012. "Impacts of Permanent and Transitory Shocks on Optimal Length of Moving Average to Predict Wheat Basis," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125001, Agricultural and Applied Economics Association.
    3. Fernandez-Perez, Adrian & Frijns, Bart & Gafiatullina, Ilnara & Tourani-Rad, Alireza, 2022. "Profit margin hedging in the New Zealand dairy farming industry," Journal of Commodity Markets, Elsevier, vol. 26(C).
    4. Coffey, Brian K. & Tonsor, Glynn T. & Schroeder, Ted C., 2018. "Impacts of Changes in Market Fundamentals and Price Momentum on Hedging Live Cattle," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 43(1), January.
    5. Hayhurst, Emma & Brorsen, B. Wade, 2023. "Resilience of Grain Storage Markets to Upheaval in Futures Markets," Research on World Agricultural Economy, Nan Yang Academy of Sciences Pte Ltd (NASS), vol. 4(2), April.
    6. Marie Coiffard & Laëtitia Guilhot, 2012. "Migrations internationales : la mobilité des Hommes, facteur d'intégration régionale en Asie Orientale ?," Post-Print halshs-00755102, HAL.
    7. Rangga Handika & Sania Ashraf, 2018. "Financialized Commodities and Stock Indices Volatilities," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 153-164.
    8. Bekkerman, Anton & Brester, Gary W. & Taylor, Mykel, 2016. "Forecasting a Moving Target: The Roles of Quality and Timing for Determining Northern U.S. Wheat Basis," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(1), pages 1-17, January.
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    10. Onel, Gulcan & Karali, Berna, 2014. "Relative Performance of Semi-Parametric Nonlinear Models in Forecasting Basis," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169795, Agricultural and Applied Economics Association.

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