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Risk premiums on inventory assets: the case of crude oil and natural gas

2001; Wiley; Volume: 21; Issue: 2 Linguagem: Inglês

10.1002/1096-9934(200102)21

1096-9934

Timothy J. Considine, Donald F. Larson,

Climate Change Policy and Economics

Journal of Futures MarketsVolume 21, Issue 2 p. 109-126 Risk premiums on inventory assets: the case of crude oil and natural gas Timothy J. Considine, Corresponding Author Timothy J. Considine Associate Professor [email protected] Department of Energy, Environmental, and Mineral Economics, Pennsylvania State University, University Park, PennsylvaniaDepartment of Energy, Environmental, and Mineral Economics, Pennsylvania State University, 221 Eric A. Walker Building, University Park, PA 16802-5010Search for more papers by this authorDonald F. Larson, Donald F. Larson World Bank, Washington, DCSearch for more papers by this author Timothy J. Considine, Corresponding Author Timothy J. Considine Associate Professor [email protected] Department of Energy, Environmental, and Mineral Economics, Pennsylvania State University, University Park, PennsylvaniaDepartment of Energy, Environmental, and Mineral Economics, Pennsylvania State University, 221 Eric A. Walker Building, University Park, PA 16802-5010Search for more papers by this authorDonald F. Larson, Donald F. Larson World Bank, Washington, DCSearch for more papers by this author First published: 02 January 2001 https://doi.org/10.1002/1096-9934(200102)21:2 3.0.CO;2-ACitations: 37AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onEmailFacebookTwitterLinkedInRedditWechat Abstract This study tested for the presence of risk premiums on crude oil and natural gas. The econometric analysis followed from a stochastic model in which the equilibrium value of inventories depends on a convenience yield and an option value related to price uncertainty. The empirical findings provide rather strong support for the presence of risk premiums and also evidence for the existence of convenience yields. The risk premiums rose sharply with greater price volatility and help to explain why prices for immediate sales often exceed prices for future delivery. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:109–126, 2001 BIBLIOGRAPHY Blanchard, O. J. (1983, June). The production and inventory behavior of the American automobile industry. Journal of Political Economy, 365–400. 10.1086/261154 Web of Science®Google Scholar Blinder, A., & Maccini, L. J. (1991). Taking stock: A critical assessment of recent research on inventories. Journal of Economic Perspectives, 5, 73–96. 10.1257/jep.5.1.73 Web of Science®Google Scholar Brennan, M. J. (1958). The supply of storage. 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