Duration dependence among agricultural futures with different maturities

ABSTRACT

The purpose of this paper is to analyse the interdependence of price durations among agricultural futures contracts with different maturities. We apply an extended autoregressive conditional duration (ACD) model to storable and non-storable agricultural commodities. Using Chicago Mercantile Exchange (CME) Best-Bid-Best-Offer (BBO) futures data, we find duration dependence for corn, wheat, live cattle, and lean hog. Somewhat surprisingly, we do not find differences between storable and non-storable commodities. The main contribution of our analysis is to provide empirical evidence that short-term effects motivated by market microstructure theory do not outweigh arbitrage relations along the forward curve as suggested by theories of storage and normal backwardation.

KEYWORDS:

• Commodity futures
• price durations
• forward curve
• ACD models

JEL CLASSIFICATION:

• G14
• Q14

Disclosure statement

No potential conflict of interest was reported by the authors.