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The live cattle futures market and daily cash price movements

✍ Scribed by B. Wade Brorsen; Charles M. Oellermann; Paul L. Farris

Publisher
John Wiley and Sons
Year
1989
Tongue
English
Weight
660 KB
Volume
9
Category
Article
ISSN
0270-7314

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✦ Synopsis

1' cash prices. The live cattle futures in particular have been criticized. Although some have argued that futures trading can lower the average level of cash prices (Wise, 1962;Bagnell, 1963), a more common belief is that futures markets tend to destabilize cash prices and thus increase the risk faced by producers. Most past research, however, is inconsistent with this belief.

Past studies have generally concluded that futures trading either reduces variability or has no significant effect. Only Figlewski found that price variability increased in the presence of a futures market. Figlewski was unable to offer a satisfactory explanation of his findings and his conclusions have been seriously questioned by subsequent work (Committee on Agriculture, p. 204). Past empirical research on the effects of futures markets on cash prices has generally used some measure of variance of weekly or monthly cash prices (e.g.

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