Journal Article10.1086/296385
Commodity Futures Prices: Some Evidence on Forecast Power, Premiums, and the Theory of Storage
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: This article examined two models of commodity futures prices and found evidence of variation in the basis in response to both interest rates and seasonals in convenience yields, and showed evidence of forecast power for 10 of 21 commodities and time-varying expected premiums for five commodities.
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Abstract: We examine two models of commodity futures prices. The theory of storage explains the difference between contemporaneous futures and spot prices (the basis) in terms of interest changes, warehousing costs, and convenience yields. We find evidence of variation in the basis in response to both interest rates and seasonals in convenience yields. The second model splits a futures price into an expected premium and a forecast of the maturity spot price. We find evidence of forecast power for 10 of 21 commodities and time-varying expected premiums for five commodities.
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Citations
Commodity Futures Prices: More Evidence on Forecast Power, Risk Premia and the Theory of Storage
TL;DR: In this paper, the authors examined the temporal stability of the evidence for two commodity futures pricing theories and showed that the forecasting power of commodity futures cannot be attributed to the extent to which they exhibit seasonality.
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Carbon capture and storage—Investment strategies for the future?
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Diversification benefits in the cryptocurrency market under mild explosivity
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Futures-Based Commodity ETFs
TL;DR: This paper examined the sources of the deviation between futures-based commodity ETF returns and the changes in commodity prices using crude oil ETFs and concluded that only investors sophisticated enough to understand and actively monitor commodity futures market conditions should use these ETFs.
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Commodity derivatives pricing with cointegration and stochastic covariances
TL;DR: A continuous-time dynamics of cointegrated assets with a stochastic covariance matrix is developed and the joint characteristic function of asset returns in closed-form is derived, offering an endogenous explanation for the Stochastic mean-reverting convenience yield.
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References
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TL;DR: In this paper, the authors find that most of the variation in forward rates is variation in premium, and the premium and expected future spot rate components of forward rates are negatively correlated, and they conclude that the forward market is not efficient or rational.
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Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis
TL;DR: In this article, the authors examined the hypothesis that the expected rate of return to speculation in the forward foreign exchange market is zero; that is, the logarithm of the forward exchange rate is the market's conditional expectation of the future spot rate, and they were able to reject the simple market efficiency hypothesis for exchange rates from the 1970s and the 1920s.
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The information in the term structure
TL;DR: In this paper, a regression approach to measure the information in forward interest rates about time varying premiums and future spot interest rates is presented. But the regression approach is limited to short-term Treasury bills and does not consider longer-maturity bills.
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Futures Trading and the Storage of Cotton and Wheat
TL;DR: In this article, a theory of stockholding and futures markets is proposed to predict the relations among some of the data collected in futures markets, which is inconsistent with the theory of futures markets advanced by J. M. Keynes and J. R. Hicks.
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Detecting Spot Price Forecasts In Futures Prices
TL;DR: In this article, the authors argue that if the current spot price equals the true expectation of the future spot price, the futures market cannot provide a better forecast than the realized spot price.
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