Item

An anatomy of commodity futures risk premia

Szymanowska,M.
; 
de Roon,F.A.
; 
Nijman,T.E.
; 
van den Goorbergh,R.W.J.
Abstract
We identify two types of risk premia in commodity futures returns: spot premia related to the risk in the underlying commodity, and term premia related to changes in the basis. Sorting on forecasting variables such as the futures basis, return momentum, volatility, inflation, hedging pressure, and liquidity results in sizable spot premia between 5% and 14% per annum and term premia between 1% and 3% per annum. We show that a single factor, the high-minus-low portfolio from basis sorts, explains the cross-section of spot premia. Two additional basis factors are needed to explain the term premia.
Description
Date
2014-02
Journal Title
Journal ISSN
Volume Title
Publisher
Collections
Tilburg University Research Output Collection
Show all metadata
Research Projects
Organizational Units
Journal Issue
Keywords
Citation
Szymanowska, M, de Roon, F A, Nijman, T E & van den Goorbergh, R W J 2014, 'An anatomy of commodity futures risk premia', Journal of Finance, vol. 69, no. 1, pp. 453-482. https://doi.org/10.1111/jofi.12096
URI
https://hdl.handle.net/20.500.14602/58138
Embedded videos