IDEAS home Printed from https://ideas.repec.org/p/ags/nccc24/379013.html
   My bibliography  Save this paper

Was Allen Paul Right? Liquidation Bias in Commodity Futures Markets

Author

Listed:
  • Yan, Lei
  • Irwin, Scott H.
  • Sanders, Dwight R.
  • Smith, Aaron

Abstract

This paper finds that during the last few days of trading in most commodity futures contracts the nearby futures price increases significantly relative to the prices for deferred contracts. The change in the price spread between nearby and first deferred futures contracts is strongly associated with the change in open interest of the nearby futures contract. We argue that the rise in nearby prices reflects a liquidation premium that buyers receive for bearing the risk of carrying long positions in nearby contracts into the final days of trading. The liquidation bias is consistent with the presence of delivery options in commodity futures markets.

Suggested Citation

Handle: RePEc:ags:nccc24:379013
DOI: 10.22004/ag.econ.379013
as

Download full text from publisher

File URL: https://ageconsearch.umn.edu/record/379013/files/Yan_Irwin_Sanders_Smith_NCCC_2024.pdf
Download Restriction: no
File URL: https://libkey.io/10.22004/ag.econ.379013?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:nccc24:379013. 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.