Premium
Can commodity futures risk factors predict economic growth?
Author(s) -
Kang Jangkoo,
Kwon Kyung Yoon
Publication year - 2020
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.22155
Subject(s) - futures contract , predictability , economics , risk premium , commodity , momentum (technical analysis) , capital asset pricing model , asset (computer security) , financial economics , term (time) , spot contract , econometrics , finance , physics , computer security , quantum mechanics , computer science
Abstract This paper examines whether commodity futures risk factors can predict future economic growth. We test risk factors capturing various spot or term premia and find that only three factors capturing term premia on the basis‐momentum, basis, and change in slope are robust predictors for future economic growth, especially for long horizons. Our findings highlight the importance of the term premia, rather than the spot premia on which the literature has mainly focused. Moreover, we find that possible explanations for predictability of commodity factors—the intertemporal asset pricing model and information diffusion explanation—are all inconsistent with our empirical results.