The informational content of distant-delivery futures contracts
Schnake, Kristin Nicole
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The futures markets have two main goals, which are price discovery and risk management. We focus on soybean and live cattle distant-delivery futures contracts to discover the informational value added to nearby contracts which assists in price discovery. By employing a direct test proposed by Vuchelen and Gutierrez (2005) and then comparing those results to a nonparametric test presented by Henriksson and Merton (1981), the research shows that beyond the one-month out futures contracts for both soybeans and live cattle no information is added when using the Vuchelen and Gutierriz test. The Henriksson and Merton test shows that the three-month out live cattle and five-month out soybean contracts add additional information beyond the one-month out live cattle and three-month out soybean contracts respectively.