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Fear of Hazards in Commodity Futures Markets

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

MPRA Paper from University Library of Munich, Germany

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; Longshort portfolios. (search for similar items in EconPapers)
JEL-codes: Q02 (search for similar items in EconPapers)
Date: 2019-09-27, Revised 2020-05-06
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Related works:
Journal Article: Fear of hazards in commodity futures markets (2020) Downloads
Working Paper: Fear of Hazards in Commodity Futures Markets (2020) Downloads
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