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Hog Futures - The Life of a Contract Comparing Expiration to Weekly Futures Prices

John Lawrence and, Clay Hoffman (October, 2009)

Summary

The Live and, more recently, Lean Hog futures market is a single location where anyone with an opinion on what prices will be in the future can essentially vote their forecast. The resulting futures prices represent a “composite” forecast at a particular point in time. However, futures markets trade on known information and react as new information becomes available. Research has repeatedly shown that the futures are as accurate, or better, than other forecasting methods, but just how good of a predictor of the contract expiration price are weekly futures prices?