An Investigation into the Equilibrium Structure of the Commodity Futures Market Anomaly |
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| Authors: | J Austin Murphy Jimmy E Hilliard |
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| Institution: | Oakland University, Rochester, MI 48309-4401. (Currently a Visiting Scholar at the FHLBB.);University of Tennessee, Knoxville, TN 37996. This paper benefited from the useful suggestions made at the 1986 Financial Management Association meeting and from the helpful comments of William Beranek, Robert Dince, Carter Hill, Ed Selby, Joseph Terza, and two anonymous reviewers. Any remaining errors are those of the authors. |
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| Abstract: | Commodity futures contracts are shown to be characterized by indivisibility problems and tax disadvantages. An empirical test demonstrates that long futures investors were compensated for these drawbacks prior to the mid-1970s. However, compensation for the investment disadvantages of commodity futures ceased to exist after 1974. The year 1974 is significant because barriers to institutional investment in the futures market were removed in that year. |
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