Journal Article

Monte Carlo Analysis of Mean Reversion in Commodity Futures Prices

Scott H. Irwin, Carl R. Zulauf and Thomas E. Jackson

in American Journal of Agricultural Economics

Published on behalf of Agricultural and Applied Economics Association

Volume 78, issue 2, pages 387-399
Published in print May 1996 | ISSN: 0002-9092
Published online May 1996 | e-ISSN: 1467-8276 | DOI: https://dx.doi.org/10.2307/1243711
Monte Carlo Analysis of Mean Reversion in Commodity Futures Prices

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This study examines whether mean reversion is present in corn, soybean, wheat, live hog, and live cattle futures prices. Consistent with earlier studies, asymptotic regression results provide substantial evidence of mean reversion in commodity futures price movements. In sharp contrast, the Monte Carlo regression analysis does not provide support for the existence of mean reversion in commodity futures prices. A clear implication is that the asymptotic regression results are misleading. The reason is that the small sample distributions of test statistics are not well approximated by assumed asymptotic distributions.

Keywords: efficient market hypothesis; futures prices; mean reversion; Monte Carlo; G130; Q130

Journal Article.  0 words. 

Subjects: Economics ; Agricultural Economics

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