The LME is a major international commodity exchange for industrial metals. Both futures contracts and spot metals are traded there, and the textbook principle of the futures-spot convergence precisely holds there. In this paper, we formulate two claims about spot and futures return prediction....

We develop an extended mean-variance model to investigate the relationship between variance risk premia (VRP) and expected futures returns in the commodity market. In the presence of stochastic variance, commodity producers trade both futures and options to hedge their exposure to commodity...