Seasonality in Agricultural Commodity Futures

40 Pages Posted: 7 Nov 2000

See all articles by Carsten Sørensen

Carsten Sørensen

Copenhagen Business School - Department of Finance

Abstract

The stochastic behavior of agricultural commodity prices is investigated using observations of the term structures of futures prices over time. The continuous time dynamics of (log-) commodity prices are modeled as a sum of a deterministic seasonal component, a non-stationary state-variable, and a stationary state-variable. Futures prices are established by standard no-arbitrage arguments and the Kalman filter methodology is used to estimate the model parameters for corn futures, soybean futures, and wheat futures based on weekly data from the Chicago Board of Trade for the period 1972-1997. Furthermore, in a discussion of the estimated seasonal patterns in agricultural commodity prices, the paper provides empirical evidence on the theory of storage that predicts a negative relationship between stocks of inventory and convenience yields; in particular, convenience yields used in this analysis are extracted using the Kalman filter.

JEL Classification: G10, G13

Suggested Citation

Sørensen, Carsten, Seasonality in Agricultural Commodity Futures. EFA 0689; EFMA 2000 Athens. Available at SSRN: https://ssrn.com/abstract=245931 or http://dx.doi.org/10.2139/ssrn.245931

Carsten Sørensen (Contact Author)

Copenhagen Business School - Department of Finance ( email )

Solbjerg Plads 3
Frederiksberg, DK-2000
Denmark

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