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Portfolio Diversification, Futures Markets, and Uncertain Consumption Prices
Author(s) -
Berck Peter,
Cecchetti Stephen G.
Publication year - 1985
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 - 10.2307/1241068
Subject(s) - futures contract , economics , normal backwardation , diversification (marketing strategy) , portfolio , financial economics , stochastic discount factor , contango , consumption (sociology) , monetary economics , capital asset pricing model , microeconomics , business , marketing , social science , sociology
Abstract This paper examines the robustness of the Keynes‐Hicks backwardation hypothesis for futures markets in a model that admits diversification and inflation protection as speculative motives. It presents a criterion in terms of the correlation of futures price with anticipated consumption net of other asset holdings for the Keynes‐Hicks proposition to be true. The paper finds the effect of changes in net wealth and commodity demand on the risk premium, spread, open interest, and storage.