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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) :
Auckland University of Technology, Auckland
Cass Business School, City University, London
EDHEC Business School, Nice
Presentation :
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.| 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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Located in Lille, Nice, Paris, London and Singapore, EDHEC is one of the 20 best business schools in the world. Resolutely international and directly connected to the world of business, it is known for the excellence of its research and its capacity to train entrepreneurs and managers able to move the lines.
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