Unspanned Macroeconomic Risks in Oil Futures
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چکیده
This paper constructs a macro-finance model for commodity futures. I document a feedback relationship between crude oil prices and real economic activity. The channel from real activity to oil prices is unspanned – meaning not identified in current futures prices – consistent with oil futures as a hedge asset against supply shocks. Unspanned macroeconomic risks have first order effects on risk premiums and the value of real options. The model also yields a precise estimate of the cost of carry that is strongly related to physical inventories. ∗USC Marshall School of Business. Email: [email protected]. Many thanks to my committee members Wayne Ferson (chair), Scott Joslin, Gordon Phillips, Gerard Hoberg, and Kenneth Ahern for their advice and encouragement.
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