Financialization and speculators risk premia in commodity futures markets

Colin Carter; C Revoredo-Giha

doi:10.1016/j.irfa.2023.102691

Financialization and speculators risk premia in commodity futures markets

Colin Carter^*, C Revoredo-Giha

^*Corresponding author for this work

Rural Development & Food Marketing

Research output: Contribution to journal › Article › peer-review

4 Citations (Scopus)

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Abstract

J.M. Keynes coined the term normal backwardation, a situation where a futures price for a particular expiry month is less than the expected spot price for that month. He argued hedgers pay speculators a risk premium, giving rise to normal backwardation. We study the behavior of commodity futures before and since financialization of the markets, which started about 20 years ago. We find the poor returns to managed futures in recent years are likely due to the impact of financialization and the associated outside money suppressing the futures risk premium.

Original language	English
Article number	102691
Number of pages	27
Journal	International Review of Financial Analysis
Volume	88
Early online date	11 Jun 2023
DOIs	https://doi.org/10.1016/j.irfa.2023.102691
Publication status	Print publication - Jul 2023

Keywords

Commodity market financialization
Futures risk premium
Normal backwardation

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10.1016/j.irfa.2023.102691Licence: CC BY-NC-ND

1-s2.0-S1057521923002077-mainFinal published version, 1.24 MBLicence: CC BY-NC-ND

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Financialization and speculators risk premia in commodity futures markets

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Financialization and Speculators Risk Premia in Commodity Futures Markets

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