The skewness of commodity futures returns

Adrian Fernandez-Perez, Bart Frijns, Ana-Maria Fuertes and Joelle Miffre ()
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Adrian Fernandez-Perez: AUT - Auckland University of Technology
Joelle Miffre: Audencia Business School

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Abstract: This article studies the relation between the skewness of commodity futures returns and expected returns. A trading strategy that takes long positions in commodity futures with the most negative skew and shorts those with the most positive skew generates significant excess returns that remain after controlling for exposure to well-known risk factors. A tradeable skewness factor explains the cross-section of commodity futures returns beyond exposures to standard risk premia. The impact that skewness has on future returns is explained by investors' preferences for skewness under cumulative prospect theory and selective hedging practices.

Keywords: Selective hedging; Commodities; Futures pricing; Skewness (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-fmk
Note: View the original document on HAL open archive server: https://audencia.hal.science/hal-01678744
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Citations: View citations in EconPapers (72)

Published in Journal of Banking and Finance, 2018, 86, pp.143-158. ⟨10.1016/j.jbankfin.2017.06.015⟩

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Journal Article: The skewness of commodity futures returns (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01678744

DOI: 10.1016/j.jbankfin.2017.06.015

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