Based on the existent possible explanations of oil futures term structure, this study provides a more fundamental view, which has a theoretical support from the theory of storage and well-suited intuitions in correspondence with reality. By using structural econometrical models, it divides oil...

The aim of this paper is to investigate the impact of the financialization of commodity markets on the profitability of strategies based on momentum and term structure. The performance of an array of portfolios from double-sorts on non-commercial traders' participation, historical returns and...

Given the generally observed mean-reverting nature of spot commodity prices, it should naturally follow that across time, roll yields (and therefore, backwardation) have to be the dominant explanatory variable for individual futures contract returns over long enough time horizons. In this paper,...

In this paper, we propose an easy-to-use yet comprehensive model for a system of cointegrated commodity prices. While retaining the exponential affine structure of previous approaches, our model allows for an arbitrary number of cointegration relationships. We show that the cointegration...

This paper studies optimal calendar spreads in commodity futures markets while taking into account a stochastic convenience yield. We show that a convenience yield imperfectly correlated with the spot commmodity price results in an optimal strategy composed of two commodity futures contracts....

Term premiums, defined as the excess return of long-dated contracts over short-dated contracts, in commodity futures are strongly predictable, both in the time series and in the cross section, by roll yield spreads. Strategies that exploit this predictability show sizable Sharpe ratios and are...

This paper examines the informational content of commodity futures term structures over time. Time series of commodity prices and returns are analyzed by means of static and rolling principal component analysis. We use weekly data from January 1998 to July 2009 of 23 commodity underlyings from...

Futures contracts on the New York Mercantile Exchange are the most liquid instruments for trading crude oil, which is the world’s most actively traded physical commodity. Under normal market conditions, traders can easily find counterparties for their trades, resulting in an efficient market...

This paper develops an empirical cost of carry model with endogenously conditioned convenience yield. The approach is implemented using monthly prices of all futures contracts traded at the New York Mercantile Exchange between 1985 and 2006. Tests indicate that the model fits the data extremely...

Even though there were numerous plausible explanations for the oil-price rally that culminated in July of 2008, there remains much uncertainty on how much to ascribe this rally to speculation, given the lack of transparency in the global oil markets. Was there excessive speculation in the oil...