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JOURNAL OF ACCOUNTING AND FINANCE
A Comprehensive Study on Normal Backwardations in Futures Markets
Author(s): Jeong W. Lee
Citation: Jeong W. Lee, (2013) "A Comprehensive Study on Normal Backwardations in Futures Markets," Journal of Accounting and Finance, Vol. 13, Iss. 1, pp. 115 - 121
Article Type: Research paper
Publisher: North American Business Press
Abstract:
This article examines the theory of the normal backwardation (or contango) and forecasting theory in
futures markets. This study finds evidence on the extent to which these two seemingly opposing theories
have been operative in futures markets for last 24 years. The study shows that normal backwardation (or
even contango) is not general characteristic of futures markets. Each market is unique. Behaviors of some
futures prices are quite consistent with a priori expectations. Surprises, however, come from financial
futures contracts in that extreme forms of backwardation and contango are very evident here, whereas
many may believe that forecasting skills are most needed in these markets.
