The Tortoise versus the Hare: The Role of Term Structure versus Spot Price Trends in Determining Commodity Futures Returns

2006 ◽  
Author(s):  
Hilary Till
Keyword(s):  
Term Structure ◽  
Commodity Futures ◽  
Spot Price ◽  
Price Trends ◽  
Structure Versus

The Information in the Term Structure of Commodity Futures

2011 ◽  
Author(s):  
Denis B. Chaves ◽  
Vitali Kalesnik ◽  
Bryce Little
Keyword(s):  
Term Structure ◽  
Commodity Futures

Return Characteristics of Commodities

2018 ◽  
Author(s):  
Dianna Preece
Keyword(s):  
Financial Crisis ◽  
Negative Correlation ◽  
Institutional Investors ◽  
Financial Stress ◽  
Commodity Futures ◽  
Futures Contracts ◽  
The Subject ◽  
Diversified Portfolio

The role of commodities in a diversified portfolio has been the subject of research and debate since the late 1970s. Investors can hold the physical commodity or use derivatives such as futures contracts to access commodity exposure. Institutional investors primarily gain exposure to commodities via futures contracts. Commodity futures returns are comprised of a collateral return, a spot return, and a roll return. Research dating back to the late 1970s suggests that commodities should be included in diversified portfolios because they act as an inflation hedge, are portfolio diversifiers due to negative correlation with stocks and bonds, and potentially offer returns and volatility comparable to equities. Commodity performance has been generally weak in the years following the financial crisis of 2007–2008. Many studies find that correlation of commodity returns with stocks and bonds increases during periods of financial stress.

Pricing of Futures Contracts

2018 ◽  
Author(s):  
Timothy A. Krause
Keyword(s):  
Fair Value ◽  
Commodity Futures ◽  
Futures Contracts ◽  
Spot Price ◽  
Futures Prices ◽  
No Arbitrage ◽  
Spot Prices ◽  
Cost Of Carry ◽  
Contract Expiration ◽  
The Cost

This chapter examines the relation between futures prices relative to the spot price of the underlying asset. Basic futures pricing is characterized by the convergence of futures and spot prices during the delivery period just before contract expiration. However, “no arbitrage” arguments that dictate the fair value of futures contracts largely determine pricing relations before expiration. Although the cost of carry model in its various forms largely determines futures prices before expiration, the chapter presents alternative explanations. Related commodity futures complexes exhibit mean-reverting behavior, as seen in commodity spread markets and other interrelated commodities. Energy commodity futures prices can be somewhat accurately modeled as a generalized autoregressive conditional heteroskedastic (GARCH) process, although whether these models provide economically significant excess returns is uncertain.

On the role of commodity futures in portfolio diversification

2021 ◽  
Author(s):  
Hooi Hooi Lean ◽  
Duc Khuong Nguyen ◽  
Ahmet Sensoy ◽  
Gazi Salah Uddin
Keyword(s):  
Commodity Futures ◽  
Portfolio Diversification

Forecasting equity returns: The role of commodity futures along the supply chain

2020 ◽  
Vol 41 (1) ◽  
pp. 46-71
Author(s):  
Chenchen Li ◽  
Chongfeng Wu ◽  
Chunyang Zhou
Keyword(s):  
Supply Chain ◽  
Equity Returns ◽  
Commodity Futures

scholarly journals On the Timing and Pricing of Dividends: Comment

2016 ◽  
Vol 106 (10) ◽  
pp. 3185-3223 ◽  
Author(s):  
Florian Schulz
Keyword(s):  
Term Structure ◽  
Risk Premium ◽  
Risk Premia ◽  
Equity Returns ◽  
Equity Risk Premium ◽  
Short Term ◽  
Equity Risk ◽  
Market Portfolio ◽  
Show Evidence

I present novel empirical evidence on the term structure of the equity risk premium. In contrast to previous research that documented high discount rates for the short-term component of the market portfolio, I show evidence for an unconditionally flat term structure of equity risk premia. The tension with previous literature arises largely as a result of differential treatments of heterogeneous investment taxes, manifested in micro evidence on abnormal equity returns on ex-dividend days, and liquidity. The results not only help resolve an important recent “puzzle” but provide further important insights on the role of investment taxes in asset pricing. (JEL G11, G12, G35)

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