Commodity Forecasting_JBF.pdf (390.16 kB)
The predictive performance of commodity futures risk factors
journal contribution
posted on 2023-06-09, 04:04 authored by Shamim Ahmed, Daniel TsvetanovThis paper investigates the time-series predictability of commodity futures excess returns from factor models that exploit two risk factors – the equally weighted average excess return on long positions in a universe of futures contracts and the return difference between the high- and low-basis portfolios. Adopting a standard set of statistical evaluation metrics, we find weak evidence that the factor models provide out-of-sample forecasts of monthly excess returns significantly better than the benchmark of random walk with drift model. We also show, in a dynamic asset allocation environment, that the information contained in the commodity-based risk factors does not generate systematic economic value to risk-averse investors pursuing a commodity stand-alone strategy or a diversification strategy.
History
Publication status
- Published
File Version
- Accepted version
Journal
Journal of Banking and FinanceISSN
0378-4266Publisher
ElsevierExternal DOI
Volume
71Page range
20-36Department affiliated with
- Business and Management Publications
Research groups affiliated with
- Business and Finance Research Group Publications
Full text available
- Yes
Peer reviewed?
- Yes
Legacy Posted Date
2016-11-16First Open Access (FOA) Date
2018-01-10First Compliant Deposit (FCD) Date
2016-11-16Usage metrics
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