TY - JOUR
T1 - Estimating the Location of World Wheat Price Discovery
AU - Janzen, Joseph P.
AU - Adjemian, Michael K.
N1 - Joseph P. Janzen is an assistant professor in the Department of Agricultural Economics and Economics, Montana State University. Michael K. Adjemian is a research agricultural economist in the Market and Trade Economics Division at the USDA Economic Research Service. The authors thank Phil Garcia and seminar participants at the 2016 AAEA Annual Meeting and the 2017 ASSA Meeting for helpful comments. This material is based upon work supported by Cooperative Agreement #58-30000-5-0112 between the USDA Economic Research Service and Montana State University. The views expressed in this article are those of the authors and may not be attributed to the Economic Research Service or the USDA. Correspondence to be sent to: [email protected].
PY - 2017/10
Y1 - 2017/10
N2 - The United States may be losing its leadership role in the world wheat market. Rising trading volume in foreign futures markets and shifting shares of world trade are suggested as evidence of this shift, but neither necessitates that futures markets in the United States are any less important for wheat price discovery. This paper applies high frequency pricing data and market microstructure methods, including the Yan and Zivot (2010) information leadership share, to estimate the proportion of price discovery occurring in wheat futures markets associated with Chicago, Kansas City, Minneapolis, and Paris. We find United States futures markets remain dominant, although the share of price discovery for the Paris market increased noticeably in 2010, coinciding with major supply shocks in Russia and Ukraine. Prior to August 2010, 91% of information about the common fundamental value of wheat was first revealed in United States futures markets in an average month. After August 2010, this share dropped to 75%.
AB - The United States may be losing its leadership role in the world wheat market. Rising trading volume in foreign futures markets and shifting shares of world trade are suggested as evidence of this shift, but neither necessitates that futures markets in the United States are any less important for wheat price discovery. This paper applies high frequency pricing data and market microstructure methods, including the Yan and Zivot (2010) information leadership share, to estimate the proportion of price discovery occurring in wheat futures markets associated with Chicago, Kansas City, Minneapolis, and Paris. We find United States futures markets remain dominant, although the share of price discovery for the Paris market increased noticeably in 2010, coinciding with major supply shocks in Russia and Ukraine. Prior to August 2010, 91% of information about the common fundamental value of wheat was first revealed in United States futures markets in an average month. After August 2010, this share dropped to 75%.
KW - Wheat
KW - futures
KW - information share
KW - market microstructure
KW - price discovery
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U2 - 10.1093/ajae/aax046
DO - 10.1093/ajae/aax046
M3 - Article
AN - SCOPUS:85031687132
SN - 0002-9092
VL - 99
SP - 1188
EP - 1207
JO - American Journal of Agricultural Economics
JF - American Journal of Agricultural Economics
IS - 5
ER -