Forecasting Performance of Lumber Futures Prices

Abstract

We test the forecasting power and information content of lumber futures prices traded on the Chicago Mercantile Exchange, from 1995 to 2013, at four forecast horizons. A Mincer-Zarnowitz regression finds evidence of statistically significant forecasting power at all forecast horizons. The results also support the presence of a time-varying risk premium for the shorter forecast horizons. A Granger causality test provides evidence that lumber futures prices lag spot prices in information assimilation over longer forecast horizons, while neither lagging nor leading over shorter forecast horizons.