This paper considers four competing propositions to explain the convex relationship between inventories and the cost-adjusted basis called the 'Working curve' - the convenience yield, the risk premium, data aggregation and the imbedded options value inherent to a futures contract. We use 70...

Perold (2007) shows that, given a diffuse prior that is being updated in light of a noisy market price, the posterior distribution says that value-weighting and equal-weighting one's portfolio makes no difference. We argue that the diffuse prior is hard to reconcile with reality and that a...

Regressions often use pre-orthogonalized regressors. For example, the exposure of a stock's return to exchange-rate changes is conventionally estimated by regression, and often, the market return is included as an additional regressor. By first orthogonalizing the market return on the exchange...