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Empirical Contributions to Basis Theory: The Case of Citrus Futures
Author(s) -
Ward Ronald W.,
Dasse Frank A.
Publication year - 1977
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1239610
Subject(s) - convenience yield , basis (linear algebra) , futures contract , economics , econometrics , futures market , orange (colour) , financial economics , spot contract , mathematics , physics , geometry , optics
A futures basis should reflect the marginal cost of physical product plus a risk premium less a convenience yield. However, unique market characteristics may lead to basis bias not explained by the storage theory. An estimate of the basis model for frozen orange concentrate is used to test the theory of storage and to illustrate anticipatory aspects of the basis not included in storage theory.