Commodity Risk Factors and Intertemporal Asset Pricing

Adrian Fernadez-Perez, Ana-Maria Fuertes, Joëlle Miffre: This paper proposes a commodity-based specification of the Intertemporal CAPM (ICAPM) that uses state variables grounded on the theories of storage and hedging pressure.

Author(s):

Adrian Fernadez-Perez

Auckland University of Technology, Auckland

Ana-Maria Fuertes

Cass Business School, City University, London

Joelle Miffre

EDHEC Business School, Nice

Accordingly, factor-mimicking portfolios are formed by taking long positions in backwardated contracts and short positions in contangoed contracts according to either term structure, hedging pressure or momentum signals. The resulting portfolio returns are able to predict changes in the investment opportunity set of agents over long horizons in a way that is consistent with rational pricing by risk-adverse investors. Relative to several traditional implementations of the ICAPM, the proposed specification prices reasonably well a large cross-section of assets that include stocks, fixed income securities and commodity futures contracts.
Pdf
Commodity Risk Factors and Intertemporal Asset Pricing...
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Type: Working paper
Date: le 07/04/2014
Extra information : For more information, please contact EDHEC Research and Development Department [ research@drd.edhec.edu ]
Research Cluster : Finance

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