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School of Business | Department of Finance | Finance | 2013
Thesis number: 13539
Impact of commodity index rolls on the futures term structure
Author: Roslander, Risto-Matti
Title: Impact of commodity index rolls on the futures term structure
Year: 2013  Language: eng
Department: Department of Finance
Academic subject: Finance
Index terms: rahoitus; financing; rahoitusinstrumentit; financial instruments; futuurit; futures; likviditeetti; liquidity
Pages: 64
Key terms: Commodity futures, commodity indices, index rolls, futures term structure, liquidity, open interest, CFTC

In this thesis, I study the effects of commodity index rolls on nearby commodity futures returns and futures term structure. More specifically, I examine the impact of commodity index investors' and speculators' positions on roll yields of nearby futures contracts during the "Goldman roll". In addition, I study the futures returns in the post-rolling period. Furthermore, by employing daily dollar volumes, my objective is to calculate the effect of liquidity in the rolling period. Finally, I conduct a sub-period analysis and show how the anticipation of index rolls has moved earlier within the rolling period and that the index rolls affect futures term structures in more deferred maturities.


The dataset consists of 4337 individual futures contracts and contains daily futures price, open interest and volume observations on each contract from January 1995 to December 2012. My sample is divided to 19 index commodities and 18 non-index commodities. In addition, I use the breakdown of weekly positions provided by Commodity Futures Trading Commission (CFTC). To test the hypotheses, I estimate several panel regressions with varying set-ups. The regressions have been conducted by using Newey-West heteroskedasticity and autocorrelation robust standard errors.


Commodity index rolls depress roll yields between nearby and second nearby futures contracts during the rolling period. In addition, net index trader positions have a negative impact on roll yields and managed money spread positions have a positive impact on roll yields. Furthermore, as a new evidence I find that roll yields tend to revert after the rolling period to better reflect the fundamentals, supply and demand after the rolling period. Unlevered excess returns of 80-110 basis points can be earned each month by anticipating index rolls and reversing the position after the index rolls. No such effect exists in non-index commodities.

The anticipation of index rolls by speculators and new indices with dynamic rolling methodologies have resulted in earlier timing of the rolls. In addition, due to increased investor attention the price impact anomaly is slowly disappearing and moving to other maturities outside the traditional rolling period of 5th-9th business days in each month.
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