Hoarding the Herd: The Convenience of Productive Stocks

摘要

This paper investigates the convenience yield that emerges in markets with productive stocks. We isolate the economic fundamentals giving rise to the yield, and show how these map to the empirical convenience yield measure. A model for price dynamics is derived from an economic model for optimal stock levels. We show how the price process reduces to a simple non-linear first-order Markov process. The model is estimated for the Norwegian market for farmed salmon by Generalized Methods of Moments, where stock growth is approximated by sea-water temperature. Our estimation result supports the theorized role of stock growth as a convenience yield component. Our results are relevant for the functioning of futures markets for commodities such as fish and other animal production where systematic stock growth affects the term structure. (c) 2014 Wiley Periodicals, Inc. Jrl Fut Mark 35:679-694, 2015