NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Predictive Content of Commodity Futures

Menzie D. Chinn, Olivier Coibion

NBER Working Paper No. 15830
Issued in March 2010
NBER Program(s):   IFM

This paper examines the relationship between spot and futures prices for a broad range of commodities, including energy, precious and base metals, and agricultural commodities. In particular, we examine whether futures prices are (1) an unbiased and/or (2) accurate predictor of subsequent spot prices. While energy futures prices are generally unbiased predictors of future spot prices, there is much stronger evidence against the null for other commodity markets. This difference appears to be driven in part by the depth of each market. We find that over the last five years, it is much harder to reject the null of futures prices being unbiased predictors of future spot prices than in earlier periods for almost all commodities. In addition, futures prices do approximately as well as a random walk in forecasting future spot prices, and vastly outperform a reduced form empirical model.

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Document Object Identifier (DOI): 10.3386/w15830

Published: "The Predictive Content of Commodity Futures," Journal of Futures Markets, January 2013 (with Olivier Coibion). citation courtesy of

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