yield, the frictionless risk-free rate, and default risk reveals that the covariance between stock returns and the …

producers' hedging demand (speculators' risk-capacity) increase hedging costs via price-pressure on futures, reduce producers …' inventory holdings, and thus spot prices. Consistent with our model, producers' default risk forecasts futures returns, spot … prices, and inventories in oil and gas market data from 1980-2006, and the component of the commodity futures risk premium …