Vines climbing higher: Risk management for commodity futures markets using a regular vine copula approach

2020 ◽  
Author(s):  
Hemei Li ◽  
Zhenya Liu ◽  
Shixuan Wang
Keyword(s):  
Risk Management ◽  
Futures Markets ◽  
Commodity Futures ◽  
Commodity Futures Markets ◽  
Copula Approach ◽  
Vine Copula

How well can investors diversify with commodities? Evidence from a flexible copula approach

2019 ◽  
Vol 36 (2) ◽  
pp. 183-206 ◽  
Author(s):  
Panos Fousekis ◽  
Vasilis Grigoriadis
Keyword(s):  
Financial Crisis ◽  
Portfolio Management ◽  
Design Methodology ◽  
Futures Markets ◽  
Investment Strategy ◽  
Sharp Contrast ◽  
Commodity Futures ◽  
Content Type ◽  
Commodity Futures Markets ◽  
Copula Approach

Purpose This paper aims to investigate empirically the linkages between stock and commodity futures markets. Design/methodology/approach It involves the application of a flexible copula approach to weekly total returns from the S&P 500 index and from three commodity sub-indices (agriculture, metals and energy) from 1995 to 2017. Findings Co-movement is by no means frequent and symmetric. It was predominantly zero before the last financial crisis, and since then, it is positive and asymmetric. The pattern of asymmetry is consistent with transmission of shocks under extreme negative shocks only. Recently, total returns of commodity futures are very poor. At the same time, commodity futures markets move in step (out of step) with stock markets when the latter plunge (rise), pointing to limited diversification benefits. These appear to justify the concerns of investors and researchers whether including commodities in a portfolio of assets is still a prudent investment strategy. Originality/value It is the only manuscript that combines a flexible copula approach and co-movement measurement along both the positive and negative diagonals. The findings are in sharp contrast with those reported by Delatte and Lopez (2013) and are very important for portfolio management.

Anomalies in Commodity Futures Markets: Risk or Mispricing?

2020 ◽  
Author(s):  
Fabian Hollstein ◽  
Marcel Prokopczuk ◽  
Björn Tharann
Keyword(s):  
Futures Markets ◽  
Commodity Futures ◽  
Commodity Futures Markets

Financialization of Commodity Markets

2018 ◽  
Author(s):  
Kyle J. Putnam
Keyword(s):  
Business Cycle ◽  
Futures Markets ◽  
Commodity Price ◽  
Commodity Markets ◽  
Commodity Futures ◽  
Futures Prices ◽  
Price Behavior ◽  
Risk And Return ◽  
Commodity Futures Markets ◽  
Asset Class

In the early 2000s, financial investors began pouring billions of dollars into the commodity futures markets seeking the unique investment benefits of this distinct asset class. This “financialization” process has called into question the fundamental risk and return properties of commodity futures as evidence has emerged favoring the idea that the massive increase in investor flows caused a rise in futures prices, volatility, and intra- and intermarket return correlations. However, a contrarian line of research contends that the effects of the new “speculative” capital on the futures markets are unsubstantiated and the increased participation of financial investors poses little consequence to the economics of the marketplace. This latter line of literature maintains that the investment benefits of commodity futures have not been diminished and that fundamental factors and business cycle variations can explain the observed changes in commodity price behavior.

Anomalies in Commodity Futures Markets

2021 ◽  
Author(s):  
Fabian Hollstein ◽  
Marcel Prokopczuk ◽  
Björn Tharann
Keyword(s):  
Factor Structure ◽  
Futures Markets ◽  
Commodity Markets ◽  
Commodity Futures ◽  
Idiosyncratic Volatility ◽  
Large Set ◽  
Jump Risk ◽  
Commodity Futures Markets

In recent years, commodity markets have become increasingly popular among financial investors. While previous studies document a factor structure, not much is known about how prominent anomalies are priced in commodity futures markets. We examine a large set of such anomaly variables. We identify sizable premia for jump risk, momentum, skewness, and volatility-of-volatility. Other prominent variables, such as downside beta, idiosyncratic volatility, and MAX, are not priced in commodity futures markets. Commodity investors should rebalance their portfolios regularly. Returns for annual holding periods are substantially weaker than for monthly rebalancing.

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