Academic journal article Journal of Economics & Management

Analysis of Selected Seasonality Effects in Market of Barley, Canola, Rough Rice, Soybean Oil and Soybean Meal Future Contracts

Academic journal article Journal of Economics & Management

Analysis of Selected Seasonality Effects in Market of Barley, Canola, Rough Rice, Soybean Oil and Soybean Meal Future Contracts

Article excerpt

(ProQuest: ... denotes formulae omitted.)


According to Efficient Market Hypothesis (EMH), introduced by Fama [1970], the security prices fully reflect all available information. This theory has been subjected to many analysis and has become a main source of disagreement between academics and practitioners. The problem of the financial markets effi- ciency, especially of equity markets, has become a main topic of number of scientific works, which has led to a sizable set of publications examining this issue. In many empirical work dedicated to the time series analysis of rates of return and stock prices, statistically significant effects of both types were found, i.e. calendar effects and effects associated with the size of companies. These effects are called "anomalies", because their existence testifies against market efficiency. Discussion of the most common anomalies in the capital markets can be found, among others, in Simson [1988] or Latif et al. [2011].

One of the most common calendar anomalies observed on the financial markets are:

I. Day-of-the-week effect - different distributions of expected rates of return can be observed for different days of the week [Keim and Stambaugh 1984]. On the Polish market, findings regarding the day-of-the-week effect were conducted among others by: Buczek [2005, pp. 51-55] and Szyszka [2007, pp.141-146].

II. Monthly effect - achieving by portfolio replicating the specified stock index, different returns in each month. For the first time, this effect was observed by Keim [1983], who noted that the average rate of return on stocks with small capitalisation is the highest in January.

III. Other seasonal effects - in the financial literature, the following calendar effects can be found:

1. The weekend effect - Cross [1973] found that markets tend to raise on Fridays and fall on Mondays. His findings generated a flood of research [Lakonishok and Levi 1982; Jaffe and Westerfield 1985; Condoyanni et al. 1987; Connolly 1991; Abraham and Ikenberry 1994].

2. The holiday effects - markets before holidays or other trading breaks tend to rise.

3. Within-the-month effect - positive rates of returns only occur in the first half of the month [Ariel 1987; Kim and Park 1994].

4. Turn-of-the month effect - average rate of return calculated for the last day of the month and for three days of the next month, was higher than the average rate of return calculated for the month, for which the rate of return of only one session, was taken.

Commodity market is one of the segments of the financial market, characterised by high heterogeneity of assets compared to the stock or bond markets [Johnson and Soenen 1997]. It is often perceived as a separate asset class, which in turn leads to low correlation of commodity market rates of return in comparison to the returns on the stock or bonds markets. The consequence of this fact is the possibility of constructing more diversified investment portfolio compared to a portfolio solely consisting of shares or bonds.

In the world literature, in contrast to the stock market, relatively little attention has been dedicated to the occurrence of the seasonality effects on the agricultural commodity market. This fact was one of the reasons encouraging the author to undertake empirical studies.

The aim of this article is to examine the prevalence of selected seasonality effects on the markets of: barley, canola, rough rice, soybean oil and soybean meal future contracts. The prices of barley and canola futures contracts, quoted on the Canadian ICE Futures Exchange are expressed in Canadian dollars and the contract unit is equal to 20 tons. The prices of soybean oil futures, soybean meal futures and rough rice futures are quoted on Chicago Mercantile Exchange in USD dollars and the contract unit is defined as: 60 000 lbs (~ 27 metric tons), 100 short tons (~ 91 metric tons) and 2 000 hundredweight (CWT) (~ 91 metric tons), respectively. …

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