Unformatted text preview: after the initiation of a futures contract? What is the risk premium in the futures return? What does Keynesian normal backwardation theory say about risk premium, hedgers and speculators? 3. What does “basis” mean in futures market? What is “contango” vs. “backwardation”? How is basis related to risk premium and spot return in commodity market? 4. How are the returns on futures compared with those on stocks and bonds? What are possible portfolio implications? 5. What does the literature find about the return predictability in futures market? What are useful predictors? How will you interpret the predictability from a practitioner’s perspective? 6. How will you perform a portfolio strategy to take the advantage of trend effect in the futures market? What are possible explanations for the persistence of momentum effect?...
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This note was uploaded on 10/31/2010 for the course NBA 6730 at Cornell.