Fundamentals of Sharpe Ratios in Storable Commodity Markets

Sami Attaoui and Pierre Six

No 379015, 2023 Conference, April 24-25, 2023, St. Louis, Missouri from NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: We determine model free estimates of the Sharpe ratios of the spot price and the basis for storable commodities. We use these estimates to conduct a thorough analysis of these Sharpe ratios across four commodity classes - Energy, Base Metals, Grains and Precious Metals, that cover twelve individual commodities. We find similar results across the twelve commodities and the Sharpe ratios of the two risks in terms, of descriptive statistics, seasonality, meanreversion and determinants. Our results have major implications for the understing of the risks of commodities under the physical probability measure.

Keywords: Agricultural and Food Policy; Demand and Price Analysis (search for similar items in EconPapers)
Pages: 33
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nccc23:379015

DOI: 10.22004/ag.econ.379015

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