Hedging strategies and price risk: An empirical analysis.

摘要

This dissertation focused on the use of futures contracts as a hedge against price risk and is motivated by two key questions. First, will daily corn (soybean) futures prices consistently yield higher/lower prices than daily cash spot prices, after adjusting for an arbitrage bound? Second, does a hedge ratio exist that minimizes price risk for corn (soybean) producers?; Data consisted of daily futures prices and daily cash spot prices for corn (September/December) and soybean (November/January) contracts for the period 1970 through 2000. These two commodities have the largest futures trading and highest production volume of all agricultural commodities.; Two primary data analysis techniques were applied. First, price differences were analyzed using a timing model, adjusted for an arbitrage bound. The results from the timing model do not support the null hypothesis that “a time frame does not exist in which daily corn (soybean) futures prices are consistently higher/lower than the related daily cash spot price, after adjusting for an arbitrage bound.” In fact, the results suggest that futures prices more often fall “below” the arbitrage lower bound limit than they do within or above the bound.; Second, the data was analyzed using a mean-variance framework and a logarithmic utility function to determine hedge ratios for corn (soybeans). The calculated hedge ratios do not support the null hypothesis that “a partial hedge will not consistently allow a producer to receive a higher average price than a full hedge of expected corn (soybeans) yield.” Specifically, the results for both corn contracts and the November soybean contract suggest that producers should hedge less than 100% of expected output while the results from the January soybean contract suggest that producers should hedge more than 100% of their expected output.