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The Live Cattle Futures Market And Daily Cash Price Movements

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  • Brorsen, B. Wade

Abstract

Comparative static results suggest that if futures markets improve cash market efficiency as expected then the variance of cash prices should increase. Empirical results with live cattle confirm the theoretical model. Cash prices for live cattle at Omaha showed increased daily variability after live cattle futures trading began on the Chicago Mercantile Exchange. The speed with which changes· occurred were also greater after the advent of futures trading. The results imply greater cash market efficiency with futures but more large short-run price changes.

Suggested Citation

  • Brorsen, B. Wade, 1988. "The Live Cattle Futures Market And Daily Cash Price Movements," 1988 Annual Meeting, August 1-3, Knoxville, Tennessee 270442, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea88:270442
    DOI: 10.22004/ag.econ.270442
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    References listed on IDEAS

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    1. Bailey, DeeVon & Brorsen, B. Wade, 1985. "Dynamics Of Regional Fed Cattle Prices," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 10(1), pages 1-8, July.
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    8. Cox, Charles C, 1976. "Futures Trading and Market Information," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1215-1237, December.
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    Cited by:

    1. Kidd, Willis V. & Brorsen, B. Wade, 2004. "Why have the returns to technical analysis decreased?," Journal of Economics and Business, Elsevier, vol. 56(3), pages 159-176.
    2. Dragan Miljkovic & Cole Goetz, 2023. "Futures markets and price stabilisation: An analysis of soybeans markets in North America," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 67(1), pages 104-117, January.
    3. Gunther Capelle-Blancard & Dramane Coulibaly, 2011. "Index trading and agricultural commodity prices: A panel Granger causality analysis," International Economics, CEPII research center, issue 126-127, pages 51-71.
    4. Bozic, Marin, 2011. "Three essays in commodity futures and options price performance," Faculty and Alumni Dissertations 160678, University of Minnesota, Department of Applied Economics.
    5. C. W. Morgan, 1999. "Futures Markets and Spot Price Volatility: A Case Study," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(2), pages 247-257, May.
    6. Alessandro Borin & Virginia Di Nino, 2012. "The role of financial investments in agricultural commodity derivatives markets," Temi di discussione (Economic working papers) 849, Bank of Italy, Economic Research and International Relations Area.
    7. Covey, Ted & Bessler, David A., 1991. "The Role of Futures in Daily Forward Pricing," 1991 Annual Meeting, August 4-7, Manhattan, Kansas 271282, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Dragan Miljkovic & Cole Goetz, 2020. "Destabilizing role of futures markets on North American hard red spring wheat spot prices," Agricultural Economics, International Association of Agricultural Economists, vol. 51(6), pages 887-897, November.

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