Crain and Lee are from University of Oklahoma. The authors acknowledge the helpful comments of Louis Ederington, an anonymous referee, and the editor, René Stulz. The Center for Financial Studies at the University of Oklahoma provided financial support for data acquisition. Lee was partially supported by a Noble Research Grant and a Center for Financial Studies Research Grant from the University of Oklahoma.
Volatility in Wheat Spot and Futures Markets, 1950–1993: Government Farm Programs, Seasonality, and Causality
Article first published online: 30 APR 2012
1996 The American Finance Association
The Journal of Finance
Volume 51, Issue 1, pages 325–343, March 1996
How to Cite
CRAIN, S. J. and LEE, J. H. (1996), Volatility in Wheat Spot and Futures Markets, 1950–1993: Government Farm Programs, Seasonality, and Causality. The Journal of Finance, 51: 325–343. doi: 10.1111/j.1540-6261.1996.tb05211.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
We explore how wheat spot and futures market volatility has been impacted by government farm programs during the 1950–1993 period. We find that changing volatility in both markets is highly associated with changing farm programs. The mandatory allotment programs of the 1950s and early 1960s (1/3/50–4/10/64) were associated with low volatility, while the voluntary programs initiated in the mid 1960s seem to have induced high volatility (4/11/64–12/22/85). Both market-driven loan rates and conservation reserve programs appear to have helped volatility revert to lower levels since the mid 1980s (12/23/85–12/30/93). We also examine seasonality and causality in conjunction with the farm programs.