 Commodity return predictability: Evidence from implied variance, skewness, and their risk premia☆☆Marinela Adriana Finta and Jose Ornelas Journal of International Financial Markets, Institutions and Money, 2022, vol. 79, issue C Abstract: This paper investigates the role of realized and implied moments and their risk premia (variance and skewness) for commodities’ future returns. We estimate these moments from high frequency and commodity futures option data that results in forward-looking measures. Risk premia are computed as the difference between implied and realized moments. We highlight, from a cross-sectional and time-series perspective, the strong positive relationship between commodity returns and implied skewness. Moreover, we emphasize the high performance of skewness risk premium. Additionally, we show that portfolios built by sorting skewness risk premium and implied skewness exhibit the best risk-return tradeoff. Most of our results are robust to other factors such as the momentum and roll yield. Keywords: Commodity Forecast; Implied Volatility; Implied Skewness; Risk Premium (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:79:y:2022:i:c:s1042443122000543 DOI: 10.1016/j.intfin.2022.101569 Access Statistics for this article Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely More articles in Journal of International Financial Markets, Institutions and Money from Elsevier |
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