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The great divergence between the USO fund and WTI spot prices

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  • George Dotsis
  • Dimitris Psychoyios

Abstract

This paper discusses the concept of the ‘roll yield’ and its impact on the performance of ETFs that invest in futures contracts of storable commodities. It argues that comparing the returns of a futures position to the returns of a spot position can be quite misleading. As a case study, it examines the returns of the USO exchange traded fund whose investment objective is to mimic the performance of WTI prices using futures contracts. A simple regression model shows that the significant underperformance of the USO fund relative to WTI spot prices has been caused by the prolonged contango market and the steep WTI futures curve in the post-2009 period.

Suggested Citation

  • George Dotsis & Dimitris Psychoyios, 2023. "The great divergence between the USO fund and WTI spot prices," Applied Economics Letters, Taylor & Francis Journals, vol. 30(13), pages 1749-1753, July.
    • Handle: RePEc:taf:apeclt:v:30:y:2023:i:13:p:1749-1753
    DOI: 10.1080/13504851.2022.2082363
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