Asset pricing for commodity futures: A puzzle

Finance

Speaker:George Skiadopoulos, University of Piraeus
Date: Friday 24 February 2012
Time: 2pm
Location: STC 0.28

Further details

Abstract

We explore whether there are any factors which explain the cross-section of commodity futures returns. We test a number of asset pricing models which have been traditionally used or recently proved successful for equities, as well as models motivated by commodity pricing theories. We also consider a Principal Components factor model which does not require á priori specification of factors but rather lets the data to determine them. We find that none of the employed models prices the cross-section of commodity futures returns. Therefore, identifying the factors that price commodities constitutes a puzzle. Our findings have implications for markets segmentation and the heterogeneity of commodity markets.