Weathering the Storm in Commodity Risk Premia Strategies

A 2018 Financial Times article described how commodity risk premia strategies had caused a “boom in trading volumes on exchanges” with estimates of $60 to $80 billion eventually going into thes ...

Auteur(s) :

Hilary Till

EDHEC-Risk Institute

A 2018 Financial Times article described how commodity risk premia strategies had caused a “boom in trading volumes on exchanges” with estimates of $60 to $80 billion eventually going into these types of strategies (Meyer, 2018).  With “risk premia strategies[,] investors systematically place bets based on so-called factors such as momentum, volatility and the pattern of prices for future delivery,” explained Meyer (2018).

In this article, we describe risk premia strategies more broadly and note how commodity risk premia strategies are an extension of ideas that were originally from the equity markets.  We will then cover a number of techniques which attempt to minimize the inevitable losses that can arise from such strategies.  Lastly, we conclude with several hypotheses on why a number of commodity risk premia strategies have historically earned high average returns.

Type : Working paper
Date : le 15/05/2019
Pôle de recherche Finance

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