Financialization and Speculators Risk Premia in Commodity Futures Markets

C Revoredo-Giha, Colin Carter*

*Corresponding author for this work

Research output: Book/Report/Policy Brief/Technical BriefResearch reportpeer-review

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 behaviour 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 languageEnglish
PublisherBayes Business School
Number of pages7
VolumeSummer 2024
Publication statusAccepted/In press - 15 Feb 2024

Publication series

NameCommodity Insights Digest (CID)
PublisherBayes Business School – City, University of London (U.K.) and Chicago-based Premia Research LLC (U.S.A.).
VolumeSummer 2024

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