Details
| Original language | English |
|---|---|
| Pages (from-to) | 73-85 |
| Number of pages | 13 |
| Journal | Quarterly Review of Economics and Finance |
| Volume | 53 |
| Issue number | 1 |
| Publication status | Published - 1 Feb 2013 |
| Externally published | Yes |
Abstract
In this paper, we examine the temporal stability of the evidence for two commodity futures pricing theories. We investigate whether the forecast power of commodity futures can be attributed to the extent to which they exhibit seasonality and we also consider whether there are time varying parameters or structural breaks in these pricing relationships. Compared to previous studies, we find stronger evidence of seasonality in the basis, which supports the theory of storage. The power of the basis to forecast subsequent price changes is also strengthened, while results on the presence of a risk premium are inconclusive. In addition, we show that the forecasting power of commodity futures cannot be attributed to the extent to which they exhibit seasonality. We find that in most cases where structural breaks occur, only changes in the intercepts and not the slopes are detected, illustrating that the forecast power of the basis is stable over different economic environments.
Keywords
- Commodity futures, Risk premia, Theory of storage
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Finance
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
Cite this
- Standard
- Harvard
- Apa
- Vancouver
- BibTeX
- RIS
In: Quarterly Review of Economics and Finance, Vol. 53, No. 1, 01.02.2013, p. 73-85.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Commodity futures prices
T2 - More evidence on forecast power, risk premia and the theory of storage
AU - Brooks, Chris
AU - Prokopczuk, Marcel
AU - Wu, Yingying
N1 - Funding information: We thank two anonymous referees and M. Guidolin (the editor) for comments that helped us to substantially improve the paper.We would like to thank the British Academy for supporting this research under grant reference number SG110442.
PY - 2013/2/1
Y1 - 2013/2/1
N2 - In this paper, we examine the temporal stability of the evidence for two commodity futures pricing theories. We investigate whether the forecast power of commodity futures can be attributed to the extent to which they exhibit seasonality and we also consider whether there are time varying parameters or structural breaks in these pricing relationships. Compared to previous studies, we find stronger evidence of seasonality in the basis, which supports the theory of storage. The power of the basis to forecast subsequent price changes is also strengthened, while results on the presence of a risk premium are inconclusive. In addition, we show that the forecasting power of commodity futures cannot be attributed to the extent to which they exhibit seasonality. We find that in most cases where structural breaks occur, only changes in the intercepts and not the slopes are detected, illustrating that the forecast power of the basis is stable over different economic environments.
AB - In this paper, we examine the temporal stability of the evidence for two commodity futures pricing theories. We investigate whether the forecast power of commodity futures can be attributed to the extent to which they exhibit seasonality and we also consider whether there are time varying parameters or structural breaks in these pricing relationships. Compared to previous studies, we find stronger evidence of seasonality in the basis, which supports the theory of storage. The power of the basis to forecast subsequent price changes is also strengthened, while results on the presence of a risk premium are inconclusive. In addition, we show that the forecasting power of commodity futures cannot be attributed to the extent to which they exhibit seasonality. We find that in most cases where structural breaks occur, only changes in the intercepts and not the slopes are detected, illustrating that the forecast power of the basis is stable over different economic environments.
KW - Commodity futures
KW - Risk premia
KW - Theory of storage
UR - http://www.scopus.com/inward/record.url?scp=84875403954&partnerID=8YFLogxK
U2 - 10.1016/j.qref.2013.01.003
DO - 10.1016/j.qref.2013.01.003
M3 - Article
AN - SCOPUS:84875403954
VL - 53
SP - 73
EP - 85
JO - Quarterly Review of Economics and Finance
JF - Quarterly Review of Economics and Finance
SN - 1062-9769
IS - 1
ER -