Time-Varying Risk Premium: Further Evidence in Agricultural Futures Markets
- Publication date : 2009-01-01
Reference
Frank, Julieta, and Philip Garcia. 2009. Time-Varying Risk Premium: Further Evidence in Agricultural Futures Markets. Applied Economics 41(6): 715-725.
Abstract
Research has provided mixed results regarding the presence of a time-varying risk premium in agricultural futures markets. In this article we test for the presence of a time-varying risk premium focusing on the properties of the underlying data. Our results show that accounting for the structural break in the 1970s plays a key role in the findings. In contrast to recent research, we find only limited evidence of time-varying risk premium. For a two-month horizon the corn, soybean meal and hog markets show no signs of a risk premium, while very weak support for a time-varying premium emerges in live cattle. For the four-month horizon, no evidence of a time-varying risk premium appears for any of the markets.
