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Forecasting Fed Cattle, Feeder Cattle, and Corn Cash Price Volatility: The Accuracy of Time Series, Implied Volatility, and Composite Approaches

Published online by Cambridge University Press:  12 June 2017

Mark R. Manfredo ,
Raymond M. Leuthold  and
Scott H. Irwin
Mark R. Manfredo
Affiliation:
Morrison School of Agribusiness and Resource Management atArizona State University
Raymond M. Leuthold
Affiliation:
Office for Futures and Options Research
Scott H. Irwin
Affiliation:
Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign
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Abstract

Economists and others need estimates of future cash price volatility to use in risk management evaluation and education programs. This paper evaluates the performance of alternative volatility forecasts for fed cattle, feeder cattle, and corn cash price returns. Forecasts include time series (e.g. GARCH), implied volatility from options on futures contracts, and composite specifications. The overriding finding from this research, consistent with the existing volatility forecasting literature, is that no single method of volatility forecasting provides superior accuracy across alternative data sets and horizons. However, evidence is provided suggesting that risk managers and extension educators use composite methods when both time series and implied volatilities are available.

Keywords

composite forecastingimplied volatilitytime seriesvolatility forecasting
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 33 , Issue 3 , December 2001 , pp. 523 - 538
Copyright
Copyright © Southern Agricultural Economics Association 2001

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