Do futures prices for commodities embody risk premiums?

Deaves, Richard; Krinsky, Itzhak

doi:10.1002/fut.3990150604

Cited by 34 publications

(16 citation statements)

References 19 publications

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“…The question of to what extent, if any, have livestock futures markets experienced periods of downward bias has generated much empirical research. See, for example, Martin and Garcia (1981), Kolb and Gray (1983), Hayenga et al (1984), and more recently, Deaves and Krinsky (1995), and Kastens and Schroeder (1995). In a similar vein, hedging returns for livestock producers would be limited if corn and soybean meal futures prices are biased upward.…”

Section: Introductionmentioning

confidence: 95%

Market efficiency in agricultural futures markets

McKenzie¹,

Holt²

2002

Applied Economics

132

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Market efficiency and unbiasedness are tested in four agricultural commodity futures markets - live cattle, hogs, corn, and soybean meal - using cointegration and error correction models with GQARCH-in-mean processes. Results indicate each market is unbiased in the long run, although cattle, hogs and corn futures markets exhibit short-run inefficiencies and pricing biases. Models for cattle and corn outperform futures prices in out-of-sample forecasting. Results also suggest short-run time-varying risk premiums in cattle and hog futures markets.

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Section: Introductionmentioning

confidence: 95%

Market efficiency in agricultural futures markets

McKenzie¹,

Holt²

2002

Applied Economics

132

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“…Liu and He reach the same conclusion with a heteroskedasticity‐robust variance ratio test. The presence of time‐varying risk premium is also detected in commodity futures markets by Deaves and Krinsky and Chang, Chen, and Chen . For the stock market, Antoniou and Holmes finds a systematic risk‐return relationship in the FTSE stock index futures contracts.…”

Section: Introductionmentioning

confidence: 76%

Time‐varying jump risk premia in stock index futures returns

Chan¹,

Feng

2011

Journal of Futures Markets

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This study tests the presence of time-varying risk premia associated with extreme news events or jumps in stock index futures return. The model allows for a dynamic jump component with autoregressive jump intensity, long-range dependence in volatility dynamics, and a volatility in mean structure separately for the normal and extreme news events. The results show significant jump risk premia in four stock market index futures returns including the DAX, FTSE, Nikkei, and S&P500 indices. Our results are robust to various specifications of conditional variance including the plain GARCH, component GARCH, and Fractionally Integrated GARCH models. We also find the time-varying risk premium associated with normal news events is not significant across all indices.

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“…This theory suggests that risk-averse speculators only participate in futures markets because of the presence of the risk premium as remuneration for their risk bearing services. However, the empirical support for this theory is limited only to non-storable commodities (Kolb, 1992;Deaves and Krinsky, 1995).…”

Section: Discussionmentioning

confidence: 94%

Examining the forward pricing function of the Australian equity index futures contract

Ivanovic

Howley

2004

Accounting & Finance

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The relationship between the Australian equity index futures and spot prices is examined. Tests indicate that futures prices with one, two and three months to maturity are unbiased predictors of the spot and hence provide an efficient hedging mechanism for Australian equity index market participants, while six-, nine- and twelve-month futures prices are biased predictors of spot prices, indicating that speculative opportunities may exist in futures contracts for these time spreads. An analysis of the short-run dynamic properties of the long-run equilibrium relationship found that for all time spreads the futures prices respond to changes in the long-run equilibrium, and for the twelve-month contract, both futures and spot prices adjust to return to the long-run equilibrium. Copyright 2004 Accounting and Finance Association of Australia and New Zealand.

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Do futures prices for commodities embody risk premiums?

Cited by 34 publications

References 19 publications

Market efficiency in agricultural futures markets

Market efficiency in agricultural futures markets

Time‐varying jump risk premia in stock index futures returns

Examining the forward pricing function of the Australian equity index futures contract

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