Information Content in Deferred Futures Prices: Live Cattle and Hogs
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The marginal forecast information contained in deferred futures prices is evaluated using
the direct test of Vuchelen and Gutierrez. In particular, the informational role of deferred
futures contracts in live cattle and hogs is assessed from the two- to twelve-month
horizons. The results indicate that unique information is contained in live cattle futures
prices out through the ten-month horizon, while hog futures prices add incremental
information at all tested horizons. Practitioners using futures-based forecasting methods
are well-served by deferred hog futures prices; however, live cattle futures listed beyond
the 10 month horizon are not adding incremental information.