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The Skewness of Commodity Futures Returns

Fernandez-Perez, A., Frijns, B., Fuertes, A. and Miffre, J. (2018). The Skewness of Commodity Futures Returns. Journal of Banking and Finance, 86, pp. 143-158. doi: 10.1016/j.jbankfin.2017.06.015

Abstract

This article studies the relation between the skewness of commodity futures returns and expected returns. A trading strategy that takes long positions in commodity futures with the most negative skew and shorts those with the most positive skew generates significant excess returns that remain after controlling for exposure to well-known risk factors. A tradeable skewness factor explains the cross-section of commodity futures returns beyond exposures to standard risk premia. The impact that skewness has on future returns is explained by investors’ preferences for skewness under cumulative prospect theory and selective hedging practices.

Publication Type: Article
Additional Information: © 2018, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: Skewness; Commodities; Futures pricing; Selective hedging
Subjects: H Social Sciences > HG Finance
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/17843
[img] Text - Accepted Version
This document is not freely accessible until 25 March 2019 due to copyright restrictions.
Available under License Creative Commons Attribution Non-commercial No Derivatives.

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