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| Sanders, Dwight R.; Manfredo, Mark R.; Greer, Tracy D.. |
| This research examines the potential basis behavior and hedging effectiveness for the Minneapolis Grain Exchange's (MGE's) cash settled corn contract. MGE futures cash settle to the National Corn Index (NCI) calculated by the Data Transmission Network (DTN). Focusing on seven regions in Illinois, the data suggest that NCI futures offer potential advantages over the existing Chicago Board of Trade (CBOT) corn futures. In particular, nearby basis variability could be reduced by 4¢ per bushel from 8.6¢ to 4.6¢ per bushel, and unconditional hedging effectiveness may increase from an average of 79% for the CBOT to 93% for the NCI. These results are statistically significant, and likely to be economically important given that agribusiness firms such as grain... |
| Tipo: Journal Article |
Palavras-chave: Basis behavior; Cash settlement; Corn futures; New contracts; Marketing. |
| Ano: 2003 |
URL: http://purl.umn.edu/14672 |
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| Manfredo, Mark R.; Sanders, Dwight R.. |
| An empirical methodology is developed for statistically testing the hedging effectiveness among competing futures contracts. The presented methodology is based on the encompassing principle, widely used in the forecasting literature, and applied here to minimum variance hedging regressions. Intuitively, the test is based on an alternative futures contract's ability to reduce residual basis risk by offering either diversification or a smaller absolute level of basis risk than a preferred futures contract. The methodology is also easily extended to cases involving multiple hedging instruments and general hedge ratio models. The methodology is demonstrated by evaluating the hedging effectiveness of Chicago Board of Trade's (CBOT) corn futures versus the... |
| Tipo: Conference Paper or Presentation |
Palavras-chave: Encompassing; Hedging effectiveness; Corn futures; Agribusiness. |
| Ano: 2003 |
URL: http://purl.umn.edu/22247 |
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