Abstract

http://ssrn.com/abstract=1785728
 
 

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The Stock Market Price of Commodity Risk


Martijn Boons


New University of Lisbon - Nova School of Business and Economics

Frans De Roon


Tilburg University - Department of Finance

Marta Szymanowska


Erasmus University Rotterdam (EUR) - Department of Finance; Erasmus Research Institute of Management (ERIM)

October 25, 2013

AFA 2012 Chicago Meetings Paper

Abstract:     
We find that commodity risk is priced in the cross section of US stock returns. Following the Commodity Futures Modernization Act (CFMA) in 2000, investors can hedge commodity price risk directly in the futures market, primarily via commodity index investments, whereas before the CFMA they could gain commodity exposure mainly via the stock market. As a result, we find that the mean returns on high-minus-low commodity beta stocks changes from -8% per year pre-CFMA to 11% per year post-CFMA. In addition, as stock market investors increasingly participate in commodity future markets post-CFMA, we find that stock market risk also affects mean commodity futures returns.

Number of Pages in PDF File: 47

Keywords: Asset pricing, Commodity futures markets ,Commodity index investment, Commodity risk premium, Hedging

JEL Classification: G11, G12, G13

working papers series


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Date posted: March 18, 2011 ; Last revised: October 27, 2013

Suggested Citation

Boons, Martijn and de Roon, Frans and Szymanowska, Marta, The Stock Market Price of Commodity Risk (October 25, 2013). AFA 2012 Chicago Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1785728 or http://dx.doi.org/10.2139/ssrn.1785728

Contact Information

Martijn Boons (Contact Author)
New University of Lisbon - Nova School of Business and Economics ( email )
Campus de Campolide
Lisbon, 1099-032
Portugal
Frans A. De Roon
Tilburg University - Department of Finance ( email )
P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 1 3466 8361/3025 (Phone)
+31 1 3466 2875 (Fax)
Marta Szymanowska
Erasmus University Rotterdam (EUR) - Department of Finance ( email )
P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31104089607 (Phone)
HOME PAGE: http://www.rsm.nl/mszymanowska
Erasmus Research Institute of Management (ERIM) ( email )
P.O. Box 1738
3000 DR Rotterdam
Netherlands
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