Hedging long‐term commodity risk: A comment

Donald Lien and Yan Wang

Journal of Futures Markets, 2004, vol. 24, issue 11, 1093-1099

Abstract: Y. V. Veld‐Merkoulova and F. A. de Roon (2003) adopted an encompassing model to demonstrate their linear yield assumption on the term structure of futures prices gains more empirical support than the linear price assumption proposed by A. Neuberger (1999). This comment points out the test procedure adopted is inappropriate and proposes an alternative non‐nested hypothesis testing method. Using the crude oil data, we find that the linear price assumption outperforms the linear yield assumption but is inferior to a generalized version of the linear yield assumption. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:1093–1099, 2004

Date: 2004
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