Does Futures Trading Reduce Price Fluctuations in the Cash Markets?

  • Mark J. Powers


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).


Random Element Future Market Cash Market Price Fluctuation Price Series 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. P. H. Cootner ed. The Random Character of Stock Market Prices, Cambridge, Mass. 1964.Google Scholar
  2. R. Gray, ‘Onions Revisited,’ Journal of Farm Economics, vol. 45, 1963.Google Scholar
  3. H. S. Houthakker, ‘Systematic and Random Elements in Short-Term Price Movements,’ American Economic Review, vol. 51, 1961.Google Scholar
  4. A. Larson, ‘Measurement of a Random-Process in Futures Prices,’ Food Research Institute Studies, vol. 1, 1960.Google Scholar
  5. G. Tintner, The Variate Difference Method, Bloomington, 1940.Google Scholar
  6. H. Working‘A Random-Difference Series for Use in the Analysis of Time-Series,’ Journal of American Statistical Association, vol. 29, 1934.Google Scholar
  7. H. Working, ‘A Theory of Anticipatory Prices,’ American Economic Review, Proceedings, vol. 48, 1958.Google Scholar
  8. H. Working‘Price Effects of Futures Trading,’ Food Research Institute Studies, vol. 1 1960.Google Scholar
  9. H. Working ‘New Concepts Concerning Futures Markets and Prices,’ American Economic Review vol. 51, 1961.Google Scholar
  10. H. Working‘Futures Markets Under Reserved Attack,’ Food Research Institute Studies vol. 4, 1963.Google Scholar
  11. U.S. Congress. House Subcommittee on Agriculture. ‘Prohibit Trading in Irish Potato Futures on Commodity Exchange,’ Hearings on H.R. 904, 88th Cong., April 8–10, 1963.Google Scholar
  12. U.S. Congress. Senate. Hearings Before a Subcommittee of the Committee on Agriculture and Forestry, 85th Cong., 1st sess., Aug. 12, 1957.Google Scholar
  13. U.S. Congress. Senate. Hearings Before the Committee on Agriculture and Forestry, 85th Congress, 2nd sess., Mar. 22–26, 1958.Google Scholar

Copyright information

© Palgrave Macmillan, a division of Macmillan Publishers Limited 1976

Authors and Affiliations

  • Mark J. Powers

There are no affiliations available

Personalised recommendations