TY - JOUR
T1 - The Value of USDA Announcements in the Electronically Traded Corn Futures Market
T2 - A Modified Sufficient Test with Risk Adjustments
AU - Huang, Joshua
AU - Serra, Teresa
AU - Garcia, Philip
N1 - Publisher Copyright:
© 2021 The Agricultural Economics Society.
PY - 2021/9
Y1 - 2021/9
N2 - The paper assesses the value of USDA information in the electronic corn futures markets. While recent research has documented large price volatility spikes after USDA announcements, increased volatility does not directly translate into value. Using multiple newly developed risk-premium measures and intraday data, we extend the Carter and Galopin approach based on estimating the risk-adjusted profits that accrue to advanced USDA information. Using the 2010–2020 period, the analysis demonstrates that USDA announcement surprises have economic value, with WASDE surprises from NASS-WASDE joint events being always valuable under all risk preferences. While the value is sensitive to these preferences, risk is relatively small because prices usually move in the direction of the market surprise which minimises losses. NASS surprises also contain value, though less than WASDE and only for the less risk averse traders. While overall risk is generally small, the intensified volatility right after the announcement points to the presence of noise and to the inadequacy of inferring the value of public information through price variability alone.
AB - The paper assesses the value of USDA information in the electronic corn futures markets. While recent research has documented large price volatility spikes after USDA announcements, increased volatility does not directly translate into value. Using multiple newly developed risk-premium measures and intraday data, we extend the Carter and Galopin approach based on estimating the risk-adjusted profits that accrue to advanced USDA information. Using the 2010–2020 period, the analysis demonstrates that USDA announcement surprises have economic value, with WASDE surprises from NASS-WASDE joint events being always valuable under all risk preferences. While the value is sensitive to these preferences, risk is relatively small because prices usually move in the direction of the market surprise which minimises losses. NASS surprises also contain value, though less than WASDE and only for the less risk averse traders. While overall risk is generally small, the intensified volatility right after the announcement points to the presence of noise and to the inadequacy of inferring the value of public information through price variability alone.
KW - Agricultural policy
KW - futures and hedging
KW - information
KW - risk and uncertainty
UR - http://www.scopus.com/inward/record.url?scp=85100020782&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85100020782&partnerID=8YFLogxK
U2 - 10.1111/1477-9552.12426
DO - 10.1111/1477-9552.12426
M3 - Article
AN - SCOPUS:85100020782
SN - 0021-857X
VL - 72
SP - 712
EP - 734
JO - Journal of Agricultural Economics
JF - Journal of Agricultural Economics
IS - 3
ER -