文档介绍：Price Discovery in Thinly Traded Markets:
Cash and Futures Relationships in Brazilian Agricultural Futures Markets
Fabio Mattos
and
Philip Garcia *
Paper presented at the NCR-134 Conference on modity Price Analysis,
Forecasting, and Market Risk Management
St. Louis, Missouri, April 19-20, 2004
Copyright 2004 by Fabio Mattos and Philip Garcia. All rights reserved.
Readers may make verbatim copies of this document for mercial purposes by any
means, provided that this copyright notice appears on all such copies.
* Fabio Mattos (******@) is a research assistant and Philip Garcia is a professor at the Department of
Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign
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Price Discovery in Thinly Traded Markets:
Cash and Futures Relationships in Brazilian Agricultural Futures Markets
This study investigates the relationship between cash and futures prices in the Brazilian
agricultural market, focusing on the effects of trading activity on the price discovery mechanism
of futures markets. The results are mixed, but several points begin to emerge. In general, higher
trading activity is linked to the presence of long-run equilibrium relationships between cash and
futures prices. In these cases, futures prices appear to play a more dominant role in the pricing
process. In more lightly traded markets, neither long-run relationships nor short-run leads and
lags can be found. Where short-run interactions exist, they are simultaneous in nature but weak.
Overall, our findings suggest that the level of market activity necessary to develop interactive
cash and futures markets is surprisingly small.
Keywords: price discovery, futures market, thin markets
INTRODUCTION
Price discovery is an important function performed by futures markets. Effective futures
markets should generate prices that express consciously-formed opinions on cash pric