Volatility risk premia and future commodity returns

Jose Ornelas and Roberto Mauad

Journal of International Money and Finance, 2019, vol. 96, issue C, 341-360

Abstract: This paper extends the empirical literature on volatility risk premium (VRP) and future returns by analyzing the predictive ability of commodity currency VRP and commodity VRP. The empirical evidence throughout this paper provides support for a positive relationship of commodity currencies VRP and future commodity returns, but only for the period after the 2008 global financial crisis. This predictability survives the inclusion of control variables like equity VRP and past currency returns. Furthermore, gold VRP also has the ability to predict future commodity returns. However, this predictability is restricted to precious metals when control variables are considered.

Keywords: Commodity predictability; Volatility risk premium; Commodity currencies (search for similar items in EconPapers)
JEL-codes: F37 G15 G17 Q02 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (8)

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Working Paper: Volatility Risk Premia and Future Commodity Returns (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:96:y:2019:i:c:p:341-360

DOI: 10.1016/j.jimonfin.2017.07.008

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