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COMMODITY FUTURES PRICES AS FORECASTS

Author
Tomek, William G.
Abstract
Futures markets provide contemporaneous price quotations for a constellation of contracts, with maturities 30 or more months in the future, and a large literature exists about interpreting these prices as forecasts. It is often preferable to think of futures markets as determining a price level and price differences appropriate to the temporal definitions of the contracts. Futures prices can be efficient in reflecting a complex set of factors, but still be poor forecasters. Forecasts from quantitative models cannot improve upon efficient futures prices as forecasting agents; the models provide equally poor forecasts. Analogous ideas are discussed for basis forecasts.
Description
WP 1996-07 August 1996
Date Issued
1996-08-01Publisher
Charles H. Dyson School of Applied Economics and Management, Cornell University
Type
article