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Hedging long‐term commodity risk: A comment
Author(s) -
Lien Donald,
Wang Yan
Publication year - 2004
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.20129
Subject(s) - futures contract , econometrics , economics , term (time) , yield (engineering) , convenience yield , commodity , mathematical economics , mathematics , financial economics , spot contract , physics , materials science , quantum mechanics , metallurgy , market economy
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