IDEAS home Printed from https://ideas.repec.org/p/ags/nccc10/285322.html
   My bibliography  Save this paper

Returns to Traders and Existence of a Risk Premium in Agricultural Futures Markets

Author

Listed:
  • Aulerich, Nicole M.
  • Irwin, Scott H.

Abstract

This paper analyzes the existence of a risk premium following the Keynesian theory of normal backwardation. A natural experiment using actual trading observations of commodity index traders is used to determine if passively holding long positions opposite hedgers earns a risk premium. Daily profits of traders are calculated in 12 markets from 2000-2009 using data from the CFTC internal large trader reporting system. Results show the commodity index traders have negative profits in 9 out of 12 commodities, resulting in an approximate net loss of -$6.9 billion. A measure of monthly return on investment does not show consistent positive profits and on average the return is negative. The evidence does not support the existence of a positive risk premium.

Suggested Citation

Handle: RePEc:ags:nccc10:285322
DOI: 10.22004/ag.econ.285322
as

Download full text from publisher

File URL: https://ageconsearch.umn.edu/record/285322/files/confp24-10.pdf
Download Restriction: no
File URL: https://libkey.io/10.22004/ag.econ.285322?utm_source=ideas
LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
---><---

More about this item

Keywords

;

Statistics

Access and download statistics

Corrections

All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:nccc10:285322. See general information about how to correct material in RePEc.

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.

We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: http://www.farmdoc.illinois.edu/nccc134/ .

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.