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Fear of Hazards in Commodity Futures Markets

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  • Fernandez-Perez, Adrian
  • Fuertes, Ana-Maria
  • Gonzalez-Fernandez, Marcos
  • Miffre, Joelle

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.

Suggested Citation

  • Fernandez-Perez, Adrian & Fuertes, Ana-Maria & Gonzalez-Fernandez, Marcos & Miffre, Joelle, 2019. "Fear of Hazards in Commodity Futures Markets," MPRA Paper 100528, University Library of Munich, Germany, revised 06 May 2020.
    • Handle: RePEc:pra:mprapa:100528
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    More about this item

    Keywords

    Commodity futures; Fear; Attention; Hazards; Internet searches; Sentiment; Longshort portfolios.;
    All these keywords.

    JEL classification:

    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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