Risk Premia and Seasonality in Commodity Futures

Constantino Hevia, Ivan Petrella and Martin Sola

Department of Economics Working Papers from Universidad Torcuato Di Tella

Abstract: We develop and estimate a multifactor a¢ ne model of commodity futures that allows for stochastic variations in seasonality. We show conditions under which the yield curve and the cost-of-carry curve adopt augmented Nelson and Siegel functional forms. This restricted version of the model is parsimonious, does not su¤er from identi?cation problems, and matches well the yield curve and futures curve over time. We estimate the model using heating oil futures prices over the period 1984-2012. We ?nd strong evidence of stochastic seasonality in the data.We analyze risk premia in futures markets and discuss two traditional theories of commodity futures: the theory of storage and the theory of normal backwardation. The data strongly support the theory of storage.

Keywords: Commodity Futures; Nelson and Siegel; Seasonality, Risk premium; Theory of storage. (search for similar items in EconPapers)
Pages: 67 pages
Date: 2016-03
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Risk premia and seasonality in commodity futures (2018)
Working Paper: Risk premia and seasonality in commodity futures (2016)
Working Paper: Risk Premia and Seasonality in Commodity Futures (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:udt:wpecon:2016_01

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