TY - JOUR
T1 - Commodity risks and the cross-section of equity returns
AU - Brooks, Chris
AU - Fernandez-Perez, Adrian
AU - Miffre, Joelle
AU - Nneji, Ogonna
PY - 2016/6/1
Y1 - 2016/6/1
N2 - The article examines whether commodity risk is priced in the cross-section of global equity returns. We employ a long-only equally-weighted portfolio of commodity futures and a term structure portfolio that captures phases of backwardation and contango as mimicking portfolios for commodity risk. We find that equity-sorted portfolios with greater sensitivities to the excess returns of the backwardation and contango portfolio command higher average excess returns, suggesting that when measured appropriately, commodity risk is pervasive in stocks. Our conclusions are robust to the addition to the pricing model of financial, macroeconomic and business cycle-based risk factors.
AB - The article examines whether commodity risk is priced in the cross-section of global equity returns. We employ a long-only equally-weighted portfolio of commodity futures and a term structure portfolio that captures phases of backwardation and contango as mimicking portfolios for commodity risk. We find that equity-sorted portfolios with greater sensitivities to the excess returns of the backwardation and contango portfolio command higher average excess returns, suggesting that when measured appropriately, commodity risk is pervasive in stocks. Our conclusions are robust to the addition to the pricing model of financial, macroeconomic and business cycle-based risk factors.
U2 - 10.1016/j.bar.2016.03.001
DO - 10.1016/j.bar.2016.03.001
M3 - Article (Academic Journal)
SN - 0890-8389
VL - 48
SP - 134
EP - 150
JO - British Accounting Review
JF - British Accounting Review
IS - 2
ER -