Commodity futures help forecast spot prices during periods of turmoil: IMF paper

Fund study shows futures-based forecasts of commodity spot prices still tend to outperform a random walk during periods of volatility

An International Monetary Fund paper published on Thursday finds no significant difference in the forecasting ability of futures markets during bull and bear markets.

David Reichsfeld and Shaun Roache, the paper's authors, assess the spot price forecasting performance of 10 commodity futures at various horizons up to two years and test whether their performance is affected by market conditions. The authors note that futures prices did a poor job as forecasters during the recent commodity price cycle and attempt to find better methods to project commodity price movements.

The authors find that the forecasting performance of futures does not depend on the slope of the futures curve, in contrast to the predictions of well-known models of commodity markets. They also find futures' forecasting performance to be invariant to whether prices are in an upswing or downswing, casting doubt on aspersions that uninformed investors participating during bull markets impede the price discovery process.

Click here to read the paper.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

You need to sign in to use this feature. If you don’t have a Central Banking account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account