TY - JOUR
T1 - Implications of commodity price behavior for marketing strategies
AU - Tomek, William G.
AU - Peterson, Hikaru Hanawa
PY - 2005/11
Y1 - 2005/11
N2 - An efficient commodity market can generate highly diverse price behavior with the passage of time, and consequently the relative performance of alternative marketing strategies can vary over different samples. A strategy that is inferior, on average, can perform relatively well in a particular period. This happened in 30%-50% of the years in an average simulated 40-year lifetime, and outcomes in particular periods vary substantially around this average. Discriminating between efficient and inefficient markets, and determining whether or not profitable arbitrage opportunities exist that will persist is exceedingly difficult. If grain markets in the United States are semistrong form efficient, then recommendations based on seeming market inefficiencies have little validity. However, routine hedging can often reduce the variance of returns, at a relatively small cost.
AB - An efficient commodity market can generate highly diverse price behavior with the passage of time, and consequently the relative performance of alternative marketing strategies can vary over different samples. A strategy that is inferior, on average, can perform relatively well in a particular period. This happened in 30%-50% of the years in an average simulated 40-year lifetime, and outcomes in particular periods vary substantially around this average. Discriminating between efficient and inefficient markets, and determining whether or not profitable arbitrage opportunities exist that will persist is exceedingly difficult. If grain markets in the United States are semistrong form efficient, then recommendations based on seeming market inefficiencies have little validity. However, routine hedging can often reduce the variance of returns, at a relatively small cost.
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U2 - 10.1111/j.1467-8276.2005.00816.x
DO - 10.1111/j.1467-8276.2005.00816.x
M3 - Article
AN - SCOPUS:33745286265
SN - 0002-9092
VL - 87
SP - 1258
EP - 1264
JO - American Journal of Agricultural Economics
JF - American Journal of Agricultural Economics
IS - 5
ER -