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Fear of hazards in commodity futures markets

Fernandez-Perez, A., Fuertes, A. ORCID: 0000-0001-6468-9845, Gonzalez-Fernandez, M. and Miffre, J. (2020). Fear of hazards in commodity futures markets. Journal of Banking and Finance, 119, p. 105902. doi: 10.1016/j.jbankfin.2020.105902

Abstract

We examine the commodity futures pricing role of active attention to weather, disease, geopolitical or economic threats or “hazard fear” as proxied by the volume of internet searches by 149 query terms. A long-short portfolio strategy that sorts the cross-section of commodity futures contracts according to a hazard fear signal captures a significant premium. This commodity hazard fear premium reflects compensation for extant fundamental, tail, volatility and liquidity risks factors, but it is not subsumed by them. Exposure to hazard-fear is strongly priced in the cross-section of commodity portfolios. The hazard fear premium exacerbates during periods of adverse sentiment or pessimism in financial markets.

Publication Type: Article
Additional Information: © 2020. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: Commodity futures, Fear, Attention, Hazards, Internet searches, Sentiment, Long-short portfolios
Subjects: H Social Sciences > HG Finance
H Social Sciences > HJ Public Finance
Departments: Business School > Finance
Date Deposited: 24 Aug 2020 11:28
URI: https://openaccess.city.ac.uk/id/eprint/24795
[img] Text - Accepted Version
This document is not freely accessible until 25 January 2021 due to copyright restrictions.
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