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Risk Premiums and Efficiency in the Market for Crude Oil Futures

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  • Richard Deaves
  • Itzhak Krinsky
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    Abstract

    The New York Mercantile Exchange's Crude Oil futures contract is investigated for the existence and nature of risk premiums and informational efficiency. During 1983-90, there is some evidence that short-term premiums were positive and covaried with recent volatility. As for efficiency, we find nothing inconsistent with weak-form efficiency, but some apparent violations cf semi-strong efficiency. We argue that, for a number of reasons, such rejections should be interpreted with caution.

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    Bibliographic Info

    Article provided by International Association for Energy Economics in its journal The Energy Journal.

    Volume (Year): Volume 13 (1992)
    Issue (Month): Number 2 ()
    Pages: 93-118

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    Handle: RePEc:aen:journl:1992v13-02-a05

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    Cited by:
    1. Sadorsky, Perry, 2002. "Time-varying risk premiums in petroleum futures prices," Energy Economics, Elsevier, vol. 24(6), pages 539-556, November.
    2. Kanamura, Takashi, 2009. "A supply and demand based volatility model for energy prices," Energy Economics, Elsevier, vol. 31(5), pages 736-747, September.
    3. Deaves, Richard & Charupat, Narat, 2002. "Backwardation and Normal Backwardation in Energy Futures Markets: With an Application to Metallgesellschaft's Short-Dated Rollover Hedging of Long-Term Contracts," ZEW Discussion Papers 02-59, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Plourde, André & Watkins, G. C., 1998. "Crude oil prices between 1985 and 1994: how volatile in relation to other commodities?," Resource and Energy Economics, Elsevier, vol. 20(3), pages 245-262, September.
    5. Herbert, John H, 1995. "Trading volume, maturity and natural gas futures price volatility," Energy Economics, Elsevier, vol. 17(4), pages 293-299, October.
    6. Michael S. Haigh & Matthew T. Holt, 2002. "Crack spread hedging: accounting for time-varying volatility spillovers in the energy futures markets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(3), pages 269-289.

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