Commodity Markets, Long-Run Predictability and Intertemporal Pricing
Joëlle Miffre, Ana-Maria Fuertes, Adrian Fernandez-Perez: This paper shows that backwardation versus contango factor-mimicking portfolios exhibit in-sample and out-of-sample predictive power for the first two moments of the distribution of long-run aggregate market returns and for the business cycle.
Auteur(s) :
EDHEC Business School
Cass Business School, City University London
Auckland University of Technology
It also demonstrates that a pricing model based on innovations to the backwardation versus contango risk factors explains relatively well a wide cross-section of equity portfolios. The cross-sectional “hedging” risk prices are economically consistent with the direction of long-run predictability of expected market returns and variances. Backwardation and contango risk factors thus act as plausible investment opportunity state variables in the context of Merton’s (1973) Intertemporal CAPM.
| Type : | Working paper |
|---|---|
| Date : | le 31/07/2015 |
| Complément d'informations |
For more information, please contact EDHEC Research and Development Department [ research@drd.edhec.edu ] |
| Pôle de recherche | Finance |
