In this paper we investigate risk premiums in commodity convenience yields. The analysis consists of two steps. First, we use a three-factor model to extract monthly convenience yields from a broad sample of commodity futures. Second, we estimate multi-factor asset pricing models with...

We find out-of-sample predictability of commodity futures excess returns using forecast combinations of 28 potential predictors. Such gains in forecast accuracy translate into economically significant improvements in certainty equivalent returns and Sharpe ratios for a mean-variance investor....

This paper investigates the relation between risk-free rates and ex-ante market volatility. It derives a theoretical model implying a negative linear relation between risk-free rates and variance futures prices. The latter are employed as a direct market-based ex-ante estimate of risk-neutral...

Many asset pricing theories treat the cross-section of returns volatility and correlations as two intimately related quantities driven by common factors, which hinders achieving a neat definition of a correlation premium. We formulate a model without factors, but with a continuum of securities...

We evaluate whether machine learning methods can better model excess portfolio returns compared to the standard regression-based strategies generally used in the finance and econometric literature. We examine 17 benchmark factor model specifications based on Expected Utility Theory and theory...

We introduce a new methodology to estimate the latent factors of a multivariate jump diffusion process illustrated with an application to the commodity futures term structure. Specifically, we propose a new state space form and then use a modified Kalman filter to estimate models with latent...

This paper aims to explore whether the cause of return premium associated with the Amihud (2002) illiquidity measure is the compensation for illiquidity or mispricing. This paper defines the Amihud premium as the difference in expected returns between high-Amihud-portfolio and...

In this study, we investigate whether geopolitical risk is a pricing factor in cross-sectional commodity futures returns. By estimating the exposure of commodity futures returns on a geopolitical risk index, we find that commodities with high-risk beta generate 7.92% higher annual returns than...