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Liquidation Bias in Futures Price Spreads
Author(s) -
Paul Allen B.
Publication year - 1986
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 - 10.2307/1241433
Subject(s) - generality , futures contract , economics , commodity , financial economics , maturity (psychological) , character (mathematics) , futures market , efficient market hypothesis , econometrics , finance , psychology , mathematics , paleontology , developmental psychology , geometry , management , horse , stock market , biology
This paper reports an unmistakable tendency during the final weeks of trading for the price of most commodity futures contracts to rise by a small but statistically significant amount relative to the price of the next maturity. Of four explanations examined, two squeeze theories are least plausible in the light of available evidence. The other two theories, one a variant of the Keynes‐Hicks hypothesis, the other a theory based on the overlap of trading and delivery, are more plausible. Yet they differ in character, generality, and in their implications for market efficiency. More data are needed to appraise them.