Abstract
The rise of commodity index traders (CITs) in the early 2000s provides a natural experiment to identify whether passive holding of long agricultural futures positions earns a positive risk premium. We use nearly a decade of daily nonpublic position data for all large traders to compute trading profits in twelve agricultural futures markets. Despite increasing price trends in a majority of markets, CITs were the biggest losers during the sample period, experiencing losses in nine out of twelve markets and an aggregate loss of $6.9 billion. This is just the opposite of the prediction of the theory of normal backwardation.
Original language | English (US) |
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Pages (from-to) | 611-652 |
Number of pages | 42 |
Journal | Applied Economic Perspectives and Policy |
Volume | 42 |
Issue number | 4 |
DOIs | |
State | Published - Dec 1 2020 |
Keywords
- Agricultural
- Commodity index traders
- Futures markets
- Risk premium
ASJC Scopus subject areas
- Development
- Economics and Econometrics