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Measuring Basis Volatility in Hard Red Winter Wheat Markets
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Wheat market volatility research has lessened in recent years, especially since the beginning of the ethanol boom in the late 2000s. Moreover, when digging deeper in preparation for this thesis, basis volatility research, specifically for hard red winter wheat, was virtually nonexistent in the recent literature. In this paper, basis is evaluated over a twenty-five-year period and is separated into five separate periods for evaluation. This analysis is focused toward measuring volatility for basis, and for the sake of completeness, futures and cash prices, as well, using different measures. Furthermore, market types were assessed to determine if they provided different perspectives on their own, while also analyzing them in conjunction with each other. Recent research following the latest price spike from 2008 – 2009 concentrated on whether volatility of the current period differs from that of previous periods. When comparing the volatility between the five periods using different measures, particularly the first and last period of the data, the results depended on the measure being used. When using measures that take the mean into account, differences in basis volatility between the current period and the first period of this analysis are minimal. However, when the mean price is not taken into account, we found that the basis volatility of the present period is even higher than during the price spike of 2008 – 2009. Lastly, results of this analysis support the conclusion that cash price provides greater pressure on basis in terms of volatility than does futures price.
Parish, Casey Joe (2019). Measuring Basis Volatility in Hard Red Winter Wheat Markets. Master's thesis, Texas A&M University. Available electronically from