An empirical examination of interest-rate futures prices

✍ Scribed by Andrew H. Chen; Marcia Millon Cornett; Prafulla G. Nabar

• Publisher: John Wiley and Sons
• Year: 1993
• Tongue: English
• Weight: 962 KB
• Volume: 13
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/fut.3990130706

✦ Synopsis

Nabar

prices, therefore, reflect equilibrium risk premiums. The bulk of the previous empirical studies that have attempted to gain insights into the determinants of the risk premiums in futures markets have applied methodologies built upon the equilibrium asset pricing models to both financial and commodity futures. The study by was the first to empirically examine the risk premiums in the commodity futures price changes within the Sharp (1964)-Lintner (1965) Capital Asset Pricing Model (CAPM) framework. She found that the commodity futures contracts had no systematic risk in the context of the CAPM. In addition, she found that price changes over the life of wheat, corn, and soybean futures contracts over the period 1952-1967 were close to zero. In a subsequent study, utilizing a larger and broader sample, Bodie and Rosansky (1980) examined futures prices for 23 commodity contracts over the period in the context of the CAPM. They confirmed that the commodity futures prices had no systematic risk. But in contrast to Dusak they found increasing prices over their sample period for 22 of the 23 commodity futures in their study.' This article investigates the behavior of T-bill and T-bond futures prices in the context of APT. Certain prespecified macroeconomic variables are employed which other studies The authors are grateful to two anonymous referees for helpful comments on the article. 'The value-weighted S&P 500 index was used as a proxy for the market portfolio in the context of the CAPM in both Dusak's (1973) and Bodie and Rosansky's (1980) studies.