✦ LIBER ✦

The economic advantage of learners in a spot/futures market

✍ Scribed by Scott C. Linn; Bryan E. Stanhouse

Publisher: John Wiley and Sons
Year: 2002
Tongue: English
Weight: 131 KB
Volume: 23
Category: Article
ISSN: 0270-7314
DOI: 10.1002/fut.10059

No coin nor oath required. For personal study only.

✦ Synopsis

Abstract

This article examines the economic advantage of learners in a futures market. We develop a dynamic model of
learning in which a spot market and futures market both exist for a real good. The economy is composed of
producers who can engage in hedging activities, speculators who trade in the futures market, and consumers who are
described by an inverse demand function for the underlying commodity. Producers and speculators are heterogeneous
and are differentiated based upon the predictive equations they employ when formulating forecasts of next
period's spot price. We derive the dynamic rational‐expectations equilibrium of the model and show
that learners enjoy an economic advantage in the futures market. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark
23:151–167, 2003

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