ARE LIVESTOCK FUTURES PRICES RATIONAL FORECASTS?

A measure for evaluating whether live hog and cattle futures prices represent rational forecasts is presented. It is assumed that the mechanisms which generate rational price forecasts possess the same stochastic properties as the cash prices with which they are associated. Using empirical data, tests are constructed which suggest that for contracts more than two months from maturity the rationality hypothesis is generally rejected. These findings are related to other studies of futures performance and the livestock markets