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I construct a macro-finance model for commodity futures that admits unspanned macroeconomic state variables. There is a negative feedback relationship between crude oil prices and real economic activity. The channel from real activity to oil prices is unspanned - that is, it is not identified in the contemporaneous futures curve - consistent with futures as a hedge asset against supply shocks. Unspanned macroeconomic risks have large effects on oil risk premiums and real options values which are missed by previous models.
I measure firm-level innovation using the text of all U.S. patents from 1926 to 2010. Technological differentiation predicts product market differentiation and is associated with higher ROA, capex, Q, and TFP. Technological differentiation is associated with lower returns but product market differentiation is not, consistent with a model of firms holding real options on heterogeneous innovations.
I construct a canonical affine model for commodity futures that includes many benchmark models as special cases. Model estimates provide strong evidence that the slope of futures prices reflects changing risk premiums and not forecasts of future prices.
Massive convergence failures in CBOT agricultural contracts in 2007-2008 were caused by caps on the fees that storage providers could charge holders of delivery certificates.