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Are there common factors in individual commodity futures returns?

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  • Daskalaki, Charoula
  • Kostakis, Alexandros
  • Skiadopoulos, George

Abstract

We explore whether there are common factors in the cross-section of individual commodity futures returns. We test various asset pricing models which have been employed for the equities market as well as models motivated by commodity pricing theories. The use of these families of models allows us also to test whether the commodities and equities market are integrated. In addition, we employ principal components factor models which do not require à priori specification of factors. We find that none of the models is successful. Our results imply that commodity markets are segmented from the equities market and they are considerably heterogeneous per se.

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  • Daskalaki, Charoula & Kostakis, Alexandros & Skiadopoulos, George, 2014. "Are there common factors in individual commodity futures returns?," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 346-363.
    • Handle: RePEc:eee:jbfina:v:40:y:2014:i:c:p:346-363
    DOI: 10.1016/j.jbankfin.2013.11.034
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    More about this item

    Keywords

    Common factors; Commodity-specific factors; Hedging pressure; Inventories; Market segmentation; Principal components analysis;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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