Economic news and the cross-section of commodity futures returns

Deepa Bannigidadmath, Paresh Kumar Narayan

Research output: Contribution to journalArticleResearchpeer-review

5 Citations (Scopus)

Abstract

This paper examines whether the economic news pessimism risk factor is priced by the investors in the cross-section of commodity futures returns. Using a unique economic news dataset, we find that the pessimism risk factor is priced in a range of commodity portfolios. Our analysis reveals a strong asymmetric effect of news on the commodity futures excess returns, and commodities with low basis, low momentum, low open interest and high volatility are exposed to negative news risk. We show that trading on pessimistic news yields meaningful profits that are unexplained by the market, basis and momentum factors.

Original languageEnglish
Article number100540
Number of pages19
JournalJournal of Behavioral and Experimental Finance
Volume31
DOIs
Publication statusPublished - Sept 2021

Keywords

  • Asset pricing
  • Commodity markets
  • Economic news
  • Profits
  • Trading strategy

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