The 'Roll Yield' Myth

26 Pages Posted: 4 Aug 2017 Last revised: 13 Feb 2018

See all articles by Hendrik Bessembinder

Hendrik Bessembinder

Arizona State University; W.P. Carey School of Business

Date Written: February 12, 2018

Abstract

It is often asserted that futures investors periodically pay or receive the difference in futures prices across contracts with different delivery dates. This "roll yield" is mythical - no such cash flow occurs, at the time of "roll" trades or on any other date. While the term is a misnomer, the "roll yield" does contain useful information. It explains when futures gains exceed or fall short of spot price changes, and for storable assets it provides information regarding benefits to the marginal holder of a spot position. This paper clarifies the actual role of the "roll yield".

Keywords: futures, commodities, roll yield

JEL Classification: G11,G13

Suggested Citation

Bessembinder, Hendrik (Hank), The 'Roll Yield' Myth (February 12, 2018). Financial Analysts Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3011634 or http://dx.doi.org/10.2139/ssrn.3011634

Hendrik (Hank) Bessembinder (Contact Author)

Arizona State University ( email )

PO Box 873906
Tempe, AZ 85207
United States

W.P. Carey School of Business ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States

HOME PAGE: http://https://wpcarey.asu.edu/people/profile/2717225

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