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Do Inventory and Time-to-Delivery Effects Vary Across Futures Contracts? Insights from a Smoothed Bayesian Estimator

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  • Karali, Berna
  • Dorfman, Jeffrey H.
  • Thurman, Walter N.

Abstract

We apply a new Bayesian approach to multiple-contract futures data to allow the inventory and time-to-delivery effects on volatility to vary across contracts. We find a varying negative relationship between lumber inventories and lumber futures price volatility. The inventory effect is smaller for the most recent contracts possibly due to increasing inventories over time. While this approach reveals the downward bias on the inventory effect introduced by restricting this parameter across contracts, it does not change the time-to-delivery effect.

Suggested Citation

  • Karali, Berna & Dorfman, Jeffrey H. & Thurman, Walter N., 2008. "Do Inventory and Time-to-Delivery Effects Vary Across Futures Contracts? Insights from a Smoothed Bayesian Estimator," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6084, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea08:6084
    DOI: 10.22004/ag.econ.6084
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    References listed on IDEAS

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    1. Berna Karali & Jeffrey H. Dorfman & Walter N. Thurman, 2010. "Delivery horizon and grain market volatility," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 30(9), pages 846-873, September.
    2. Xu, Kewei & Xiong, Xiong & Li, Xiao, 2021. "The maturity effect of stock index futures: Speculation or carry arbitrage?," Research in International Business and Finance, Elsevier, vol. 58(C).
    3. Ergen, Ibrahim & Rizvanoghlu, Islam, 2016. "Asymmetric impacts of fundamentals on the natural gas futures volatility: An augmented GARCH approach," Energy Economics, Elsevier, vol. 56(C), pages 64-74.

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