Investigation of Price Discovery and Efficiency for Cash and Futures Cotton Prices

Document Type

Article

Journal/Book Title/Conference

Western Journal of Agricultural Economics

Volume

9

Publication Date

1984

First Page

170

Last Page

176

Abstract

The role of the futures market in price discovery and its impact on efficiency have been the subject of much research and controversy. Martin and Garcia concluded in their study that futures markets are not agencies for rational price formation. However, Just and Rausser presented evidence that the futures price is a good estimator of the cash price in a future time period. Grossman and Stiglitz showed the existence of an inefficient cash market is necessary for a successful futures market. Since transaction costs (e.g., storage, interest, commissions, transportation) are lower in the futures market, speculators with access to information are able to use their information to make a profit and at the same time aid in price discovery.

This document is currently not available here.

Share

COinS