Scandinavian Working Papers in Economics
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Department of Finance, Copenhagen Business School Working Paper Series, Department of Finance, Copenhagen Business School

No 1999-14:
Seasonality in Agricultural Commodity Futures

Carsten Sørensen

Abstract: The stochastic behavior of agricultural commodity prices is investigated using ob-

servations of the term structures of futures prices over time. The continuous time

dynamics of (log-) commodity prices are modeled as a sum of a deterministic sea-

sonal component, a non-stationary state-variable, and a stationary state-variable.

Futures prices are established by standard no-arbitrage arguments and the Kalman

lter methodology is used to estimate the model parameters for corn futures, soy-

bean futures, and wheat futures based on weekly data from the Chicago Board of

Trade for the period 1972-1997. Furthermore, in a discussion of the estimated sea-

sonal patterns in agricultural commodity prices, we provide empirical evidence on

the theory of storage that predicts a negative relationship between stocks of inven-

tory and convenience yields; in particular, convenience yields used in this analysis

are extracted using the Kalman lter.

Keywords: Asset Pricing; (follow links to similar papers)

JEL-Codes: G12; (follow links to similar papers)

39 pages, December 1, 1999

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