The risk premia of energy futures
Fernandez-Perez, A., Fuertes, A-M. 
ORCID: 0000-0001-6468-9845 & Miffre, J. (2021).
The risk premia of energy futures.
Energy Economics, 102,
doi: 10.1016/j.eneco.2021.105460
Abstract
This paper studies the energy futures risk premia that can be extracted through long-short portfolios that exploit heterogeneities across contracts as regards various characteristics or signals and integrations thereof. Investors can earn a sizeable premium of about 8% and 12% per annum by exploiting the energy futures contract risk associated with the hedgers' net positions and roll-yield characteristics, respectively, in line with predictions from the hedging pressure hypothesis and theory of storage. Simultaneously exploiting various signals towards style-integration with alternative weighting schemes further enhances the premium. In particular, the style-integrated portfolio that equally weights all signals stands out as the most effective. The findings are robust to transaction costs, data mining and sub-period analyses.
| Publication Type: | Article |
|---|---|
| Additional Information: | © Elsevier. This manuscript version is made available under the CC-BY-NC-ND 4.0 license https://creativecommons.org/licenses/by-nc-nd/4.0/ |
| Publisher Keywords: | Energy futures markets, Risk premium, Long-short portfolios, Integration |
| Subjects: | G Geography. Anthropology. Recreation > GE Environmental Sciences H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HG Finance |
| Departments: | Bayes Business School > Finance |
Available under License Creative Commons Attribution Non-commercial No Derivatives.
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