Commodity futures risk premiums vary across commodities and over time depending on the level of physical inventories, as predicted by the Theory of Storage. Using a comprehensive dataset on 31 commodity futures and physical inventories between 1969 and 2006, we show that the convenience yield is...

The last decade brought substantial increased participation in commodity markets by index funds that maintain long positions in the near futures contracts. Policy makers and academic studies have reached sharply different conclusions about the effects of these funds on commodity futures prices....

If commercial producers or financial investors use futures contracts to hedge against commodity price risk, the arbitrageurs who take the other side of the contracts may receive compensation for their assumption of nondiversifiable risk in the form of positive expected returns from their...