Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5088201 | Journal of Banking & Finance | 2016 | 17 Pages |
Abstract
This 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.
Keywords
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Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Shamim Ahmed, Daniel Tsvetanov,