Commodity risks and the cross-section of equity returns

Brooks, C. ORCID: https://orcid.org/0000-0002-2668-1153, Fernandez-Perez, A., Miffre, J. and Nneji, O. (2016) Commodity risks and the cross-section of equity returns. The British Accounting Review, 48 (2). pp. 134-150. ISSN 0890-8389 doi: 10.1016/j.bar.2016.03.001

Abstract/Summary

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.

Item Type	Article
URI	https://reading-clone.eprints-hosting.org/id/eprint/59125
Identification Number/DOI	10.1016/j.bar.2016.03.001
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Elsevier
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