publication . Article . 1990

grain price expectations of illinois farmers and grain merchandisers

James S. Eales; Brian K. Engel; Robert J. Hauser; Sarahelen R. Thompson;
  • Published: 01 Jan 1990 Journal: American Journal of Agricultural Economics, volume 72, pages 701-708 (issn: 0002-9092, eissn: 1467-8276, Copyright policy)
  • Publisher: Wiley
The study's purpose is to measure the extent to which futures and option prices reflect the subjective price distribution of a subset of market participants, farmers, and grain merchandisers in Illinois. Findings suggest that in most instances the futures price is an appropriate proxy for expected price. However, volatilities implied by option premia usually overestimate the subjective variances of producers and merchandisers. These differences between individual and market expectations of variance are consistent with findings of overconfidence in the psychology literature and should be considered by analysts when making observations about hedging decisions and ...
free text keywords: Agricultural and Biological Sciences (miscellaneous), Economics and Econometrics, Financial economics, Economics, Market expectations, Overconfidence effect, Price policy, Risk aversion, Futures contract, Hedge (finance)
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