Abstract
One of the recurring arguments made against futures markets is that, by encouraging or facilitating speculation, they give rise to price instability. This argument, in various versions, has been made throughout past Congressional hearings on onion and potato futures. The theoretical literature available on the subject of futures trading and price stability is rather scanty and inconclusive. Most of the evidence has been gathered on onion and potato prices. It suggests that: a) the seasonal price range is lower with a futures market because of speculative support at harvest time; b) sharp adjustments at the end of a marketing season are diminished under futures trading because they have been better anticipated; and c) year-to-year price fluctuations are reduced under futures trading because of the existence of the futures market as a reliable guide to production planning. See Roger Gray, and Holbrook Working (1958, 1960, 1963).
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References
P. H. Cootner ed. The Random Character of Stock Market Prices, Cambridge, Mass. 1964.
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© 1976 Palgrave Macmillan, a division of Macmillan Publishers Limited
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Powers, M.J. (1976). Does Futures Trading Reduce Price Fluctuations in the Cash Markets?. In: The Economics of Futures Trading. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-02693-7_14
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DOI: https://doi.org/10.1007/978-1-349-02693-7_14
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-02695-1
Online ISBN: 978-1-349-02693-7
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