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Stats › Currencies and commodities › Crude oil premium

The crude oil risk premium stopped being statistically significant after 2005

1990 to 2004 just significant at 5%: 0.0037+0.00371990 to 2004just significant at 5%2005 to 2011 not significant: 0.0028+0.00282005 to 2011not significant

Expected return to being long the one and two month crude oil contracts, from an affine term structure model. The point estimates are closer together than the change in significance suggests, because the standard error widened from 0.0018 to 0.0026 as much as the mean fell.

Being long crude futures paid an average 2.9% over eight weeks from 1990 to 2004, just significant at the five percent level. On the same model from 2005 to 2011 the estimate is smaller and no longer significant.

0.0037Expected return to the long side, 1990 to 2004, standard error 0.0018
0.0028The same estimate for 2005 to 2011, standard error 0.0026
2.9%Average eight-week risk premium in the first subsample
About 1.2%Average first-to-third contract price difference across the full sample

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