A reexamination of the systematic downward bias in live cattle futures prices

Helmuth (1981) developed a trading technique that, over a 37-month period from January, 1978 to January, 1981, predicted 29 drops in cattle futures prices with 100% accuracy. In 1985, Pluhar, Shafer and Sporleder (PSS) reevaluated Helmuth's trading technique (HTT) and found that it produced positive gross profits. The HTT is again examined, using 7 years of data (1983-1989) beyond the PSS study period. The results of this study show that the mean gross profit per trade for the HTT is -$67.95 per contract. An April trading restriction proposed by PSS eliminated only one of 2 large losses in the April contract. Unlike the earlier period, there are 2 large losses in the February contract during 1983-1989. The simulated trading results for the entire period 1974-1989 show that a significant return can be earned if the 90-day April restriction used by PSS is broadened to eliminate all trades in the February and April contracts signaled during the period January through March.