Journal
AGRICULTURAL ECONOMICS
Volume 40, Issue 4, Pages 421-436Publisher
WILEY-BLACKWELL PUBLISHING, INC
DOI: 10.1111/j.1574-0862.2009.00389.x
Keywords
C33; G14; Q11; Theory of storage; Announcement effects; Event study; Futures markets; Lumber
Categories
Funding
- North Carolina Agricultural Research Service
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We investigate how lumber futures returns are affected by monthly housing starts announcements and analyze the dependence of the response on lumber inventories and time to delivery. To do so we develop a generalized least squares (GLS) method to jointly analyze simultaneously traded contracts. We find that increases in the unanticipated component of housing starts announcements increase returns on lumber futures contracts. Further, and as predicted by the theory of storage but previously unrecorded, the effects of housing starts shocks decline with lumber inventories. There is also a time-to-delivery effect: near-delivery contracts respond more sharply to housing starts news than do farther-out contracts.
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