Forecasting Cash Price Volatility of Fed Cattle, Feeder Cattle, and Corn: Time Series, Implied Volatility, and Composite Approaches

OFOR Working Paper No. 99-08

41 Pages Posted: 11 Jan 2000

See all articles by Mark R. Manfredo

Mark R. Manfredo

Arizona State University - Morrison School of Agribusiness and Resource Management

Raymond M. Leuthold

University of Illinois @ Urbana-Champaign

Scott H. Irwin

University of Illinois at Urbana-Champaign

Abstract

Considerable research effort has focused on the forecasting of asset return volatility. Debate in this area centers around the performance of time series models, in particular GARCH, relative to implied volatility from observed option premiums. Existing literature suggests that the performance of any volatility forecast is sensitive to both the data and forecast horizon of interest. This paper rigorously examines the performance of several alternative volatility forecasts for fed cattle, feeder cattle, and corn cash price returns. Forecasts include time series, implied volatility, and composite specifications. The results provide considerable insight into the performance of these alternative volatility forecasting procedures over a range of relevant forecast horizons. The evidence suggests that composite methods be used when both time series and implied volatilities are available. Insight is also gained into the performance of procedures used for scaling one-period volatility forecasts to longer horizons. However, consistent with the existing volatility forecasting literature, this research confirms the difficulty in finding a "best" volatility forecasting method across alternative data sets and horizons.

JEL Classification: G12, G13, Q13

Suggested Citation

Manfredo, Mark Ronald and Leuthold, Raymond M. and Irwin, Scott, Forecasting Cash Price Volatility of Fed Cattle, Feeder Cattle, and Corn: Time Series, Implied Volatility, and Composite Approaches. OFOR Working Paper No. 99-08, Available at SSRN: https://ssrn.com/abstract=202149 or http://dx.doi.org/10.2139/ssrn.202149

Mark Ronald Manfredo (Contact Author)

Arizona State University - Morrison School of Agribusiness and Resource Management ( email )

7001 E. Williams Field Road
Mesa, AZ 85212
480-727-1040 (Phone)
480-727-1961 (Fax)

Raymond M. Leuthold

University of Illinois @ Urbana-Champaign ( email )

1301 W. Gregory Drive
326 Mumford Hall
Urbana, IL 61801
United States
217-333-1810 (Phone)
217-333-5538 (Fax)

Scott Irwin

University of Illinois at Urbana-Champaign ( email )

344 Mumford Hall
1301 W. Gregory Dr.
Urbana, IL 61801
United States
217-333-6087 (Phone)

HOME PAGE: http://https://scotthirwin.com/

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