Commodities as Lotteries: Skewness and the Returns of Commodity Futures

This article studies the relation between skewness and subsequent returns in commodity futures markets. Systematically buying commodities with low skewness and shorting commodities with high skewne ...

Author(s):

Adrian Fernández-Pérez

Auckland University of Technology

Bart Frijns

Auckland University of Technology

Ana-Maria Fuertes

Cass Business School

Joëlle Miffre

EDHEC Business School

This article studies the relation between skewness and subsequent returns in commodity futures markets. Systematically buying commodities with low skewness and shorting commodities with high skewness generates a significant excess return of 8% a year, which is not merely a compensation for the risks associated with backwardation and contango. Skewness is also found to explain the cross-section of commodity futures returns beyond exposures to the backwardation and contango risk factors previously identified. These results are robust to various alternative specifications and extend the documented importance of skewness in the equity market to the commodity futures markets.

Type: Working paper
Date: le 23/05/2017
Research Cluster : Finance

See Also

« The Future of Finance » : EDHEC affirms its financial-sector leadership with an inaugural series of forward-looking, academic-value-added lectures
News
- 17-01-2022
EDHEC Business School plans to host a series of monthly lectures entitled “The Future...
NEWGEN NEWJOB: THE NEW PROFESSIONAL AMBITIONS OF YOUNG GRADUATES
News
- 14-01-2022
The NewGen Talent Centre decrypts the aspirations, behaviours and abilities of new-...
Press release
- 13-01-2022
Cette nouvelle étude explore et vise à comprendre la diversité des ambitions professionnelles des jeunes générations, d’en révéler les préférences et les potentiels pour l’entreprise. Lire...
ETUDE : NEWGEN NEWJOB : LES NOUVELLES AMBITIONS PROFESSIONNELLES DES JEUNES DIPLOMéS
Publication
- 13-01-2022
Cette nouvelle étude explore et vise à comprendre la diversité des ambitions...