Returns to Speculators in Commodity Futures Markets: A Comprehensive Revisit
37 Pages Posted: 3 Apr 2008 Last revised: 16 Apr 2008
Date Written: April 9, 2008
Abstract
This study investigates the performance of large speculators in 22 commodity markets over the last 15 years. We find that large speculators were profitable in many markets. Two possible sources of returns are analyzed for their relevance in these gains: The ability to forecast and the flow of risk premia. In contrast to earlier studies we use direct test procedures for both assessments. We find very little evidence of market timing ability. However, employing the theory of storage and using a volatility measure to proxy for convenience yield, we observe consistent risk premium earnings. Furthermore, momentum may be seen as a third source of returns to speculative activity.
Keywords: Commodities, Returns to Speculators, Forecasting Ability, Risk Premium, Theory of Storage, Term Structure of Futures Prices
JEL Classification: G13, G14
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Tactical and Strategic Value of Commodity Futures
By Claude B. Erb and Campbell R. Harvey
-
The Tactical and Strategic Value of Commodity Futures
By Claude B. Erb and Campbell R. Harvey
-
The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability
-
The Fundamentals of Commodity Futures Returns
By Gary B. Gorton, Fumio Hayashi, ...
-
The Fundamentals of Commodity Futures Returns
By Gary B. Gorton, Fumio Hayashi, ...
-
Momentum Strategies in Commodity Futures Markets
By Joëlle Miffre and Georgios Rallis