Time Varying Risk Premia in Futures Markets

By Graciela Laura Kaminsky, Manmohan S. Kumar

December 1, 1990

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Format: Chicago

Graciela Laura Kaminsky, and Manmohan S. Kumar Time Varying Risk Premia in Futures Markets, (USA: International Monetary Fund, 1990) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper undertakes an econometric investigation into the presence of risk premium in commodity futures markets. The statistical tests are derived from a formal model of asset pricing and are applied to futures prices in a variety of commodity markets. The results suggest that for several commodities there is evidence of a time varying risk premium, particularly in futures contracts maturing six months ahead. The implications of the study for the efficiency of the futures markets and the costs of using these markets for hedging are also noted.

Subject: Agricultural commodities, Commodities, Financial institutions, Financial markets, Futures, Futures markets, National accounts, Return on investment

Keywords: Agricultural commodities, Commodity risk, Corn futures, Excess return, Expected return, Futures, Futures markets, Futures risk premium, Null hypothesis, Portfolio asset, Return on investment, Risk premia, Risk premium hypothesis, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1990/116
Stock No:

WPIEA1161990
ISBN:

9781451941968
ISSN:

1018-5941

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