Devraj Basu, Joëlle Miffre: We construct long-short factor-mimicking portfolios that capture the hedging pressure risk premium of commodity futures.
Professor of Finance, SKEMA Business School
Professor of Finance, EDHEC Business School
We consider single sorts based on the open interests of either hedgers or speculators, as well as double sorts based on both positions. We find positive and significant commodity futures risk premiums from both single and double sorts, alongside with Sharpe ratios that systematically exceed those of long-only commodity portfolios. Further tests show that the hedging pressure risk premiums rise with the lagged volatility of commodity markets and that the cross-sectional price of commodity risk is positive. Finally, the hedging pressure risk premiums are found to explain the performance of active commodity portfolios better than long-only commodity benchmarks and to act as better diversifiers of equity risk.
|Type :||Working paper|
|Date :||le 02/01/2012|
|Pôle de recherche||Finance|