The “roll yield” myth

Research output: Contribution to journalArticle

Abstract

Futures investors are frequently said to periodically pay or receive the difference in futures prices across contracts with different delivery dates. But this “roll yield” is mythical: No such cash flow occurs—at the time of roll trades or on any other date. However, although the term is a misnomer, the roll yield does contain useful information. It explains when futures gains exceed or fall short of spot-price changes, and for storable assets, it provides information regarding benefits to the marginal holder of a spot position. This article clarifies the actual role of the roll yield.

Original languageEnglish (US)
Pages (from-to)41-53
Number of pages13
JournalFinancial Analysts Journal
Volume74
Issue number2
StatePublished - Jan 1 2018

Fingerprint

Cash flow
Investors
Price changes
Spot price
Assets
Futures prices

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

The “roll yield” myth. / Bessembinder, Hendrik.

In: Financial Analysts Journal, Vol. 74, No. 2, 01.01.2018, p. 41-53.

Research output: Contribution to journalArticle

@article{4217871ba4bb4ec2aa2401480f9371dd,
title = "The “roll yield” myth",
abstract = "Futures investors are frequently said to periodically pay or receive the difference in futures prices across contracts with different delivery dates. But this “roll yield” is mythical: No such cash flow occurs—at the time of roll trades or on any other date. However, although the term is a misnomer, the roll yield does contain useful information. It explains when futures gains exceed or fall short of spot-price changes, and for storable assets, it provides information regarding benefits to the marginal holder of a spot position. This article clarifies the actual role of the roll yield.",
author = "Hendrik Bessembinder",
year = "2018",
month = "1",
day = "1",
language = "English (US)",
volume = "74",
pages = "41--53",
journal = "Financial Analysts Journal",
issn = "0015-198X",
publisher = "CFA Institute",
number = "2",

}

TY - JOUR

T1 - The “roll yield” myth

AU - Bessembinder, Hendrik

PY - 2018/1/1

Y1 - 2018/1/1

N2 - Futures investors are frequently said to periodically pay or receive the difference in futures prices across contracts with different delivery dates. But this “roll yield” is mythical: No such cash flow occurs—at the time of roll trades or on any other date. However, although the term is a misnomer, the roll yield does contain useful information. It explains when futures gains exceed or fall short of spot-price changes, and for storable assets, it provides information regarding benefits to the marginal holder of a spot position. This article clarifies the actual role of the roll yield.

AB - Futures investors are frequently said to periodically pay or receive the difference in futures prices across contracts with different delivery dates. But this “roll yield” is mythical: No such cash flow occurs—at the time of roll trades or on any other date. However, although the term is a misnomer, the roll yield does contain useful information. It explains when futures gains exceed or fall short of spot-price changes, and for storable assets, it provides information regarding benefits to the marginal holder of a spot position. This article clarifies the actual role of the roll yield.

UR - http://www.scopus.com/inward/record.url?scp=85047510118&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85047510118&partnerID=8YFLogxK

M3 - Article

AN - SCOPUS:85047510118

VL - 74

SP - 41

EP - 53

JO - Financial Analysts Journal

JF - Financial Analysts Journal

SN - 0015-198X

IS - 2

ER -