9/6/2023 0 Comments October feeder cattle futures![]() ![]() January, November tended to have more years where the weekly prices were above the expiration price, which indicates over prediction. March, April, May, August, September, and October contracts tended to have more years where the weekly prices were below the expiration price, which indicates under prediction. Years above and below again show the variation each weekly price takes from the expiration price. With all months, the variation in the errors tends to become dramatically smaller as expiration approaches, indicating that the accuracy of the weekly prices increases closer to expiration. A larger standard deviation indicates more variation in the error. Standard deviation is a measure of variability around the average, and under normal conditions the actual forecast is expected to be within plus or minus one standard deviation of the average approximately two-thirds of the time. Tables 1-8 report the average and standard deviation of the errors, and number and percentage of years each weekly price was above or below the expiration price. ![]() It is important to know more than the average about the forecast errors. This is expected because as more information becomes available to traders, they are better able to make pricing decisions. As shown by these figures, each contract’s errors tend to decrease and move toward a zero percent error on average as the contracts mature. The errors from the January, March, April, and November contracts’ vary widely and are both positive and negative throughout. The errors from the May, August, September, and October contracts tend to be positive, indicating under prediction. ![]() As can be seen, contract errors vary widely. A positive error means the weekly price was below the expiration price, indicating under prediction, and a negative error means the weekly price was above the expiration price, indicating over prediction.īecause more information becomes available to futures traders as the contract matures, we would expect the weekly prices to inch closer to the expiration price, decreasing their error and variability, as the contract’s end approaches.įigures 1-8 show the forecast errors of the January, March, April, May, August, September, October, and November contracts over their entire trading periods from 1997-2016. The weekly prices’ forecast errors were defined as the futures price at expiration minus the futures price in trade week 1, 2, 3, etc., and are expressed as a percentage of the expiration price. These weekly averages were then compared to the futures closing price on each contract’s last day of trade. Weekly prices were an average of the futures closing prices, Monday through Friday, for each week of the contract, from January 1997-November 2016. This simple analysis compares the Feeder Cattle weekly futures prices to their contract’s expiration price in order to evaluate their accuracy. Research has repeatedly shown that the futures are as accurate, or better, than other forecasting methods, but just how good of a predictor of the contract expiration price are weekly futures prices? However, futures markets trade on known information and react as new information becomes available. ![]() The resulting futures prices represent a “composite” forecast at a particular point in time. The Feeder Cattle futures market is a single location where anyone with an opinion on what prices will be in the future can essentially vote their forecast. Pdf Feeder Cattle Futures - The Life of a Contract Comparing Expiration to Weekly Futures Prices ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |