Are There Common Factors in Individual Commodity Futures Returns?

Posted: 10 Dec 2013

See all articles by Charoula Daskalaki

Charoula Daskalaki

University of Crete, Department of Economics

Alexandros Kostakis

University of Liverpool - Management School (ULMS); The University of Manchester - Manchester Business School

George S. Skiadopoulos

University of Piraeus, Department of Banking and Financial Management; Queen Mary, University of London, School of Economics and Finance

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Date Written: November 22, 2013

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.

Keywords: Common factors, Commodity-specific factors, Hedging pressure, Inventories, Market segmentation, Principal components analysis

JEL Classification: G12, G13, G21

Suggested Citation

Daskalaki, Charoula and Kostakis, Alexandros and Skiadopoulos, George and Skiadopoulos, George, Are There Common Factors in Individual Commodity Futures Returns? (November 22, 2013). Journal of Banking and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2365239

Charoula Daskalaki

University of Crete, Department of Economics ( email )

Rethymno, Crete GR-74100
Greece

Alexandros Kostakis

University of Liverpool - Management School (ULMS) ( email )

Chatham Building
Liverpool, L69 7ZH
United Kingdom

HOME PAGE: http://www.alexkostakis.com

The University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

George Skiadopoulos (Contact Author)

Queen Mary, University of London, School of Economics and Finance

Lincoln's Inn Fields
Mile End Rd.
London, E1 4NS
United Kingdom

University of Piraeus, Department of Banking and Financial Management ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece

HOME PAGE: http://https://sites.google.com/view/george-skiadopoulos

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