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Time-to-maturity and commodity futures return volatility: The role of time-varying asymmetric information

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  • Phan, Hoàng-Long
  • Zurbruegg, Ralf
  • Brockman, Paul
  • Yu, Chia-Feng (Jeffrey)

Abstract

We examine the impact that information asymmetry has on the relationship between commodity futures contracts’ time-to-maturity and return volatility. Using mediation analysis, we find strong evidence that time-varying asymmetric information plays a significant role in influencing the time-to-maturity pattern of commodity futures return volatility. We argue that these results are partly a consequence of the financialization of commodity markets that has led to significant trading activity by uninformed hedgers as contracts mature.

Suggested Citation

  • Phan, Hoàng-Long & Zurbruegg, Ralf & Brockman, Paul & Yu, Chia-Feng (Jeffrey), 2022. "Time-to-maturity and commodity futures return volatility: The role of time-varying asymmetric information," Journal of Commodity Markets, Elsevier, vol. 26(C).
    • Handle: RePEc:eee:jocoma:v:26:y:2022:i:c:s2405851321000258
    DOI: 10.1016/j.jcomm.2021.100191
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    More about this item

    Keywords

    Futures; Hedging; Financialization; Commodity futures; Information asymmetry; Price elasticity;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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