Rational Expectations and Risk Premia in Forward Markets: Primary Metals at the London Metals Exchange

Published

Journal Article

This paper tests whether forward prices equal the traders' expectations of the future spot prices at maturity, under two different models of expectations formation: full information rational expectations and incomplete information mechanical forecasting rule. The tests are performed, over the period January 1970 through September 1980, on the forward markets for the primary metals—copper, tin, lead, and zinc‐traded in the London Metals Exchange. We find evidence consistent with the existence of time varying risk premia. 1982 The American Finance Association

Full Text

Duke Authors

Cited Authors

  • HSIEH, DA; KULATILAKA, N

Published Date

  • January 1, 1982

Published In

Volume / Issue

  • 37 / 5

Start / End Page

  • 1199 - 1207

Electronic International Standard Serial Number (EISSN)

  • 1540-6261

International Standard Serial Number (ISSN)

  • 0022-1082

Digital Object Identifier (DOI)

  • 10.1111/j.1540-6261.1982.tb03612.x

Citation Source

  • Scopus