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Structural breaks and the relationship between barley and wheat futures prices on the London International financial futures exchange

Lookup NU author(s): Dr Philip Dawson, Dr Ana Sanjuan, Dr Benedict White

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Abstract

Co-movement between futures prices can arise when commodities are substitutes. Counterintuitively, Dawson and White fail to find a significant long-run link between feed barley and wheat prices on the London International Financial Futures Exchange. This relationship is re-examined using Johansen, Mosconi, and Nielsen's co-integration procedure that permits structural breaks. Results show evidence of co-integration and hence price discovery. There is a significant break in October 2000 following Common Agricultural Policy intervention price reductions, the barley-wheat futures market is perfectly integrated, and the barley price Granger-causes the wheat price. Modeling structural breaks in price relationships appears important. © 2006 American Agricultural Economics Association.

Publication metadata

Author(s): Dawson PJ, Sanjuan AI, White B

Publication type: Article

Publication status: Published

Journal: Review of Agricultural Economics

Year: 2006

Volume: 28

Issue: 4

Pages: 585-594

ISSN (print): 1058-7195

ISSN (electronic): 2040-5804

Publisher: Oxford University Press

URL: http://dx.doi.org/10.1111/j.1467-9353.2006.00324.x

DOI: 10.1111/j.1467-9353.2006.00324.x

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