Da. Hennessy et Ti. Wahl, THE EFFECTS OF DECISION-MAKING ON FUTURES PRICE VOLATILITY, American journal of agricultural economics, 78(3), 1996, pp. 591-603
Existing literature on commodity futures price volatility emphasizes t
ime to expiration and the resolution of uncertainty. In this paper we
stress the supply and demand inflexibilities arising from decision mak
ing. A decision made on the supply (demand) side makes future supply (
demand) responses less elastic. Therefore, a shock arising after a dec
ision is made is more effective in changing the futures price than a s
hock before the decision is made. The results support the time-to-matu
rity hypothesis, but do not conflict with the state variable hypothese
s of futures price volatility. Evidence supporting the impacts of infl
exibilities are presented for corn, soybean, and wheat contracts.