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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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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 40 (2014)
Issue (Month): C ()
Pages: 346-363

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Handle: RePEc:eee:jbfina:v:40:y:2014:i:c:p:346-363

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Web page: http://www.elsevier.com/locate/jbf

Related research

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

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References

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Cited by:
  1. Symeonidis, Lazaros & Prokopczuk, Marcel & Brooks, Chris & Lazar, Emese, 2012. "Futures basis, inventory and commodity price volatility: An empirical analysis," Economic Modelling, Elsevier, vol. 29(6), pages 2651-2663.

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