IDEAS home Printed from https://ideas.repec.org/a/wsi/qjfxxx/v10y2020i02ns2010139220500093.html
   My bibliography  Save this article

An Empirical Analysis of Commodity Convenience Yields

Author

Listed:
  • Cantekin Dincerler

    (The Energy Practice, McKinsey & Company, Two Houston Center, 909 Fannin, Suite 3500, Houston, Texas 77010, USA)

  • Zeigham Khokher

    (Freeman School of Business, Tulane University, 7 McAllister Drive, New Orleans LA, 70118, USA)

  • Timothy Simin

    (Smeal School of Business, The Pennsylvania State University, 609 Business Administration Building, University Park, PA 16802, USA)

Abstract

We study convenience yield dynamics using a dataset of inventories to proxy for relative scarcity. We confirm that convenience yields are negatively related to inventories although they plateau during periods of scarcity for crude oil. Inventory withdrawals are non-monotonically related to the convenience yield and they forecast significant futures returns. Testing for the effect of demand shocks, we document both temporary and permanent price components. Importantly, we show that mean reversion in expected equilibrium prices varies with relative scarcity. This result suggests an important bias in contingent claims models in extant practice.

Suggested Citation

  • Cantekin Dincerler & Zeigham Khokher & Timothy Simin, 2020. "An Empirical Analysis of Commodity Convenience Yields," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 10(02), pages 1-27, June.
    • Handle: RePEc:wsi:qjfxxx:v:10:y:2020:i:02:n:s2010139220500093
    DOI: 10.1142/S2010139220500093
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S2010139220500093
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S2010139220500093?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alibeiki, Hedayat & Lotfaliei, Babak, 2022. "To expand and to abandon: Real options under asset variance risk premium," European Journal of Operational Research, Elsevier, vol. 300(2), pages 771-787.
    2. Maryam Movahedifar & Hossein Hassani & Masoud Yarmohammadi & Mahdi Kalantari & Rangan Gupta, 2021. "A robust approach for outlier imputation: Singular Spectrum Decomposition," Working Papers 202164, University of Pretoria, Department of Economics.
    3. Baumeister, Christiane, 2021. "Measuring Market Expectations," CEPR Discussion Papers 16520, C.E.P.R. Discussion Papers.
    4. Zaremba, Adam & Bianchi, Robert J. & Mikutowski, Mateusz, 2021. "Long-run reversal in commodity returns: Insights from seven centuries of evidence," Journal of Banking & Finance, Elsevier, vol. 133(C).
    5. Loïc Maréchal, 2023. "A tale of two premiums revisited," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(5), pages 580-614, May.
    6. Makkonen, Adam & Vallström, Daniel & Uddin, Gazi Salah & Rahman, Md Lutfur & Haddad, Michel Ferreira Cardia, 2021. "The effect of temperature anomaly and macroeconomic fundamentals on agricultural commodity futures returns," Energy Economics, Elsevier, vol. 100(C).

    More about this item

    Keywords

    Commodity pricing; theory of storage;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:qjfxxx:v:10:y:2020:i:02:n:s2010139220500093. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/qjf/qjf.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.