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Title:Backwardation and Normal Backwardation in Energy Futures Markets: With an Application to Metallgesellschaft's Short-Dated Rollover Hedging of Long-Term Contracts PDF Logo
Authors:Deaves, Richard
Charupat, Narat
Issue Date:2002
Series/Report no.:ZEW Discussion Papers 02-59
Abstract:We show that, since the inception of energy futures markets, prices have on average exhibited backwardation. Normal backwardation has also been the norm, but, because of the low power of the standard tests, most researchers have concluded that the unbiased expectations model cannot be rejected. The fact that backwardation has been and (though somewhat more weakly) continues to be prevalent makes MGRM?s strategy of hedging long-term supply commitments with short-dated futures contracts look somewhat better than previous observers have argued. That said, it should be re-stressed that their strategy was a highly speculative one and its unraveling should have come as no great surprise.
Document Type:Working Paper
Appears in Collections:ZEW Discussion Papers
Publikationen von Forscherinnen und Forschern des ZEW

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