Abstract

http://ssrn.com/abstract=1340873
 
 

References (39)



 
 

Citations (5)



 


 



Capturing the Risk Premium of Commodity Futures: The Role of Hedging Pressure


Devraj Basu


Université Lille Nord de France - Skema Business School

Joelle Miffre


EDHEC Business School

February 11, 2009


Abstract:     
We construct long-short factor mimicking portfolios that capture the hedging pressure risk premium of commodity futures. We consider single sorts based on the open interests of either hedgers or speculators, as well as double sorts based on both positions. The long-short hedging pressure portfolios are priced cross-sectionally and offer Sharpe ratios that systematically exceed those of long-only benchmarks. Further tests show that the hedging pressure risk premiums rise with the volatility of commodity futures markets and that the predictive power of hedging pressure over cross-sectional commodity futures returns is different from the previously documented forecasting power of past returns and the slope of the term structure.

Number of Pages in PDF File: 38

Keywords: Commodity, Risk premium, Hedging pressure, Term structure, Momentum

JEL Classification: G13, G14

working papers series





Download This Paper

Date posted: February 12, 2009 ; Last revised: January 9, 2013

Suggested Citation

Basu, Devraj and Miffre, Joelle, Capturing the Risk Premium of Commodity Futures: The Role of Hedging Pressure (February 11, 2009). Available at SSRN: http://ssrn.com/abstract=1340873 or http://dx.doi.org/10.2139/ssrn.1340873

Contact Information

Devraj Basu
Université Lille Nord de France - Skema Business School ( email )
Campus de Lille
Avenue Willy Brandt, Euralille
Lille, 59777
France
Joelle Miffre (Contact Author)
EDHEC Business School ( email )
58 rue du Port
Lille, 59046
France
Feedback to SSRN


Paper statistics
Abstract Views: 6,208
Downloads: 1,507
Download Rank: 5,814
References:  39
Citations:  5

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.391 seconds