Abstract:The backwardation and contango in the futures markets are explained by two popular theories, namely the theory of storage and the theory of risk premium. The investment assets tend to follow the theory of risk premium, whereas the consumption assets are likely to follow the theory of storage. As India is the largest importer of gold, and gold is used for consumption purposes (mostly by jewellers, who store gold as a consumption commodity), we empirically test whether backwardation in the gold market is explain… Show more
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