Expected Commodity Futures Returns

23 Pages Posted: 28 Mar 2008

See all articles by Saqib A. Khan

Saqib A. Khan

affiliation not provided to SSRN

Zeigham Khokher

Tulane University

Timothy T. Simin

Pennsylvania State University

Date Written: March 17, 2008

Abstract

In this article, we posit an empirical beta pricing model of expected commodity futures returns to explore predictable variation in their returns. Our model allows commodity futures returns to vary with the holdings of hedgers and allows these holdings to vary with business conditions. The model also allows for time variation in expected returns with relative scarcity of the commodity. Our evidence suggests that a large portion of the predictable variation in futures returns is explainable by these asset specific factors and that movements in these factors are related to macroeconomic variables. This evidence is consistent with rational return predictability.

Keywords: commodity futures pricing, multifactor models, conditional asset pricing

JEL Classification: G12, G13

Suggested Citation

Khan, Saqib A. and Khokher, Zeigham and Simin, Timothy T., Expected Commodity Futures Returns (March 17, 2008). Available at SSRN: https://ssrn.com/abstract=1107377 or http://dx.doi.org/10.2139/ssrn.1107377

Saqib A. Khan

affiliation not provided to SSRN

Zeigham Khokher

Tulane University ( email )

7 McAlister Drive
Tulane University
NEW ORLEANS, LA 70118
United States
504-865-5067 (Phone)

Timothy T. Simin (Contact Author)

Pennsylvania State University ( email )

University Park, PA 16802
United States
814-865-3457 (Phone)

HOME PAGE: http://timsimin.net

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