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Empirical Tests of a Simple Pricing Model for Sugar Futures

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  • Theodore E. Nijman
  • Roel Beetsma
Abstract
In this paper we test the empirical implications of a simple pricing model for commodity futures for the marginal process of prices of sugar futures. According to the pricing model, the futures price bias depends linearly on the conditional variance. We find significant coefficients, from monthly as well as daily data, if the conditional variance is modelled using the GARCH-M model. These estimates imply contango in the futures marked and a net hedging demand on the long side of it.

Suggested Citation

  • Theodore E. Nijman & Roel Beetsma, 1991. "Empirical Tests of a Simple Pricing Model for Sugar Futures," Annals of Economics and Statistics, GENES, issue 24, pages 121-131.
    • Handle: RePEc:adr:anecst:y:1991:i:24:p:121-131
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    3. Nijman, T.E. & Palm, F.C., 1991. "Recent Developments in Modeling Volatility in Financial Data," Papers 9168, Tilburg - Center for Economic Research.
    4. Nijman, T.E. & Palm, F.C., 1991. "Recent developments in modeling volatility in financial data," Other publications TiSEM 0c1ff78c-d484-43bb-bcc3-a, Tilburg University, School of Economics and Management.

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