The Storage Theory And Physical And Future Prices

This thesis examines the cost of carry theory for five metals at the London MetalExchange (LME). A qudra-variate model is constructed and the empirical resultsshow that a long run relationship exists for cash and3-month metals futures prices,3-month interest rates and physical storage costs. Alsoexamines the supply of storage model for CBOT soybeans. Price variability and convenience yield are addedto a model developed in previous literature. Theresults reveal that convenience yield and variability of new crop futures might play keyroles in making storage decisions during the crop year. Besides, a new measurement of the stock-pricerelationship for CBOT corns and soybeans is developed by constructing an equally weighted ending stocks-useratio. Results showthat grain market analysts may benefit from using the proposed new measurement forforecasting prices.