This study tests causal hypotheses emanating from theories of futures markets by utilizing methods appropriate for disproving causal relationships with observational data. The hedging pressure theory of futures markets risk premiums, the generalized version of the normal backwardation theory of Keynes, is rejected. Theories predicting that the activity levels of speculators or uninformed traders affect levels of price volatility, either positively or negatively, are also rejected. 2006 Wiley Periodicals, Inc.
