A Rational Expectations Model of Time Varying Risk Premia in Commodities Futures Markets: Theory and Evidence
AbstractThe intertemporal hedging theory is used to model the role of spot price risk, measured by the variance, in futures market risk premia. The model gives a theoretical basis for treating the variance as serially correlated when commodities are storable. T he rational expectations hypothesis implies that agents use the varianc e process to predict risk; therefore, the expected variance should be incorporated in equilibrium risk premia. Tests on data from four commodity markets show that variances do have predictable components ; however, premia are related to expected variances in only one market. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 34 (1993)
Issue (Month): 1 (February)
Contact details of provider:
Postal: 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297
Phone: (215) 898-8487
Fax: (215) 573-2057
Web page: http://www.econ.upenn.edu/ier
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Sukati, Mphumuzi, 2013. "Measuring Maize Price Volatility in Swaziland using ARCH/GARCH approach," MPRA Paper 51840, University Library of Munich, Germany.
- Stacie Beck, 2001. "Autoregressive conditional heteroscedasticity in commodity spot prices," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 16(2), pages 115-132.
- Holt, Matthew T. & Aradhyula, Satheesh V., 1998. "Endogenous risk in rational-expectations commodity models: A multivariate generalized ARCH-M approach," Journal of Empirical Finance, Elsevier, Elsevier, vol. 5(2), pages 99-129, June.
- He, Dequan & Holt, Matthew T., 2004. "Efficiency Of Forest Commodity Futures Markets," 2004 Annual meeting, August 1-4, Denver, CO, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 20344, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Byrne, Joseph P. & Fazio, Giorgio & Fiess, Norbert, 2013.
"Primary commodity prices: Co-movements, common factors and fundamentals,"
Journal of Development Economics,
Elsevier, vol. 101(C), pages 16-26.
- Byrne, Joseph P. & Fazio, Giorgio & Fiess, Norbert, 2011. "Primary commodity prices : co-movements, common factors and fundamentals," Policy Research Working Paper Series 5578, The World Bank.
- Joseph P. Byrne & Giorgio Fazio & Norbert Fiess, 2010. "Primary commodity prices: co-movements, common factors and fundamentals," Working Papers, Business School - Economics, University of Glasgow 2010_27, Business School - Economics, University of Glasgow.
- McKenzie, Andrew M. & Holt, Matthew T., 1998.
"Market Efficiency In Agricultural Futures Markets,"
1998 Annual meeting, August 2-5, Salt Lake City, UT, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)
20933, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Dahl, Christian M. & Iglesias, Emma M., 2009. "Volatility spill-overs in commodity spot prices: New empirical results," Economic Modelling, Elsevier, vol. 26(3), pages 601-607, May.
- Assa, Hirbod & Dabbous, Amal & Gospodinov, Nikolay, 2013. "A staggered pricing approach to modeling speculative storage: implications for commodity price dynamics," Working Paper, Federal Reserve Bank of Atlanta 2013-08, Federal Reserve Bank of Atlanta.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.