Is there a term structure of futures volatilities? Reevaluating the Samuelson hypothesis

The Samuelson hypothesis implies that the volatility of futures price changes increases as a contract's delivery date nears. In markets where the Samuelson hypothesis holds, accurate valuation of futures-related derivatives requires that a term structure of futures volatilities be estimated. We develop a framework for predicting the markets where the Samuelson hypothesis should be expected to hold. Unlike a prominent reinterpretation of the hypothesis, our work shows that clustering of information flows near the delivery date is not a necessary condition. We show instead that the hypothesis is generally supported in markets where spot price changes include a predictable temporary component; we argue that this condition is much more likely to be met in markets for real assets than for financial assets. Finally, we provide empirical evidence consistent with our predictions.