Commodities and the Market Price of Risk
IMF Working Papers, September 1, 2008
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- Commodities and the Market Price of Risk
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Bibliographic details
- Authors: Shaun K. Roache
- Published: September 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451870794.001
Summary
- Author: Shaun K. Roache
- Publication date: September 1, 2008
- Series: Working Paper No. 2008/221
- Volume: 2008; Issue: 221; Pages: 23
- DOI: https://doi.org/10.5089/9781451870794.001
- Stock No: WPIEA2008221
- ISBN: 9781451870794
- ISSN: 1018-5941
- Sample period analyzed: January 1973 - February 2008
- Research question: What macro risk exposures do commodity futures offer, and are these risks priced?
Methodology and Data
- Model used: Merton's (1973) intertemporal capital asset pricing model (ICAPM).
- Asset class analyzed: commodity futures.
- Sample period: January 1973 - February 2008.
Key findings
- Commodity futures offer a hedge against lower interest rates.
- Investors are willing to accept lower expected returns for positions that hedge against lower interest rates.
- Some commodities provide a hedge against U.S. dollar depreciation, but this currency-hedge risk is not priced.
Subject and keywords
- Subject: Commodities, Futures, Market risk, Real interest rates, Return on investment
- Keywords: futures contract, interest rate, risk premium, WP
IMF Working Paper: "Commodities and the Market Price of Risk" by Shaun K. Roache, Working Paper No. 2008/221, September 1, 2008.
Content in this bundle
- _wp08221 - References