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Time Varying Risk Premia in Futures Markets

Author

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  • Graciela Laura Kaminsky
  • Mr. Manmohan S. Kumar

Abstract

This paper undertakes an econometric investigation into the presence of risk premium in commodity futures markets. The statistical tests are derived from a formal model of asset pricing and are applied to futures prices in a variety of commodity markets. The results suggest that for several commodities there is evidence of a time varying risk premium, particularly in futures contracts maturing six months ahead. The implications of the study for the efficiency of the futures markets and the costs of using these markets for hedging are also noted.

Suggested Citation

  • Graciela Laura Kaminsky & Mr. Manmohan S. Kumar, 1990. "Time Varying Risk Premia in Futures Markets," IMF Working Papers 1990/116, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1990/116
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=3079
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    Cited by:

    1. Ben Zeev, Nadav & Pappa, Evi & Vicondoa, Alejandro, 2017. "Emerging economies business cycles: The role of commodity terms of trade news," Journal of International Economics, Elsevier, vol. 108(C), pages 368-376.

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