No abstract

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 risk aversion.

No abstract

Investment benefits from trading live cattle, hog, com, and soybean futures contracts are considered under the assumption that the investor's risk/return evaluation is relative to a highly diversified stock portfolio. A mean-variance approach is used to find the "optimal" mix of investments for the initial stock portfolio and for portfolios which may include both stocks and futures. The addition of futures contracts to the portfolio rarely increases the portfolio return. This finding is consistent with risk-premium results of previous studies. However, investment benefits from agricultural futures are found in the form of a reduction in the portfolio's nonsystematic risk.