Abstract
Options with different maturities can be used to generate an implied forward volatility, a volatility forecast for non-overlapping future time intervals. Using five commodities with varying characteristics, we find that the implied forward volatility dominates forecasts based on historical volatility information, but that the predictive accuracy is affected by the commodity's characteristics. Unbiased and efficient corn and soybeans market forecasts are attributable to the well-established volatility during crucial growing periods. For soybean meal, wheat, and hogs, volatility is less predictable and investors appear to demand a risk premium for bearing volatility risk.
Original language | English (US) |
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Pages (from-to) | 508-528 |
Number of pages | 21 |
Journal | Journal of Agricultural and Resource Economics |
Volume | 31 |
Issue number | 3 |
State | Published - Dec 2006 |
Keywords
- Agricultural commodity
- Efficiency
- Forecasts
- Implied forward volatility
- Options
ASJC Scopus subject areas
- Animal Science and Zoology
- Agronomy and Crop Science
- Economics and Econometrics