Are Corn Futures Prices Getting 'Jumpy'?

20 Pages Posted: 24 Mar 2020

See all articles by Anabelle Couleau

Anabelle Couleau

Universidad EAFIT

Teresa Serra

affiliation not provided to SSRN

Philip Garcia

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics

Date Written: March 2020

Abstract

The article sheds light on price jump risk in corn futures prices in the era of electronic trading and after the shift to real‐time announcement of USDA reports. Using intraday prices from 2008 to 2015, we employ a nonparametric test to detect jumps and variance analysis to assess the relative importance of jump risk. Real‐time trading of major USDA reports has substantially increased the frequency and clustering of price jumps, and results in higher market liquidity costs. In contrast, although the presence of jumps on non‐announcement days has doubled recently, their magnitude has declined as have transactions costs during their occurrence. The largest jump risk or execution risk is experienced by high frequency traders due to heightened microstructure noise during price jumps. However, traders holding long‐term market positions are only minimally affected by increased jump risk.

Keywords: Corn futures, information shocks, intraday, jump risk, nonparametric test, price jumps

Suggested Citation

couleau, anabelle and Serra, Teresa and Garcia, Philip, Are Corn Futures Prices Getting 'Jumpy'? (March 2020). American Journal of Agricultural Economics, Vol. 102, Issue 2, pp. 569-588, 2020, Available at SSRN: https://ssrn.com/abstract=3558946 or http://dx.doi.org/10.1002/ajae.12030

Anabelle Couleau (Contact Author)

Universidad EAFIT

Carrera 49 N° 7 sur – 50
Bogotá, Antioquia 00000
Colombia

Teresa Serra

affiliation not provided to SSRN

Philip Garcia

University of Illinois at Urbana-Champaign - Department of Agricultural and Consumer Economics ( email )

1301 W. Gregory Drive
427 Mumford Hall
Urbana, IL 61801
United States
217-333-0644 (Phone)
217-333-5538 (Fax)

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