Fear of hazards in commodity futures markets

Adrian Fernandez-Perez, Ana-Maria Fuertes, Marcos González-Fernández and Joelle Miffre

Journal of Banking & Finance, 2020, vol. 119, issue C

Abstract: We examine the commodity futures pricing role of active attention to weather, disease, geopolitical or economic threats or “hazard fear” as proxied by the volume of internet searches by 149 query terms. A long-short portfolio strategy that sorts the cross-section of commodity futures contracts according to a hazard fear signal captures a significant premium. This commodity hazard fear premium reflects compensation for extant fundamental, tail, volatility and liquidity risks factors, but it is not subsumed by them. Exposure to hazard-fear is strongly priced in the cross-section of commodity portfolios. The hazard fear premium exacerbates during periods of adverse sentiment or pessimism in financial markets.

Keywords: Commodity futures; Fear; Attention; Hazards; Internet searches; Sentiment; Long-short portfolios (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (13)

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Related works:
Working Paper: Fear of Hazards in Commodity Futures Markets (2020)
Working Paper: Fear of Hazards in Commodity Futures Markets (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:119:y:2020:i:c:s0378426620301680

DOI: 10.1016/j.jbankfin.2020.105902

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