Can commodity futures risk factors predict economic growth?

Kang, Jangkoo and Kwon, Kyung Yoon (2020) Can commodity futures risk factors predict economic growth? Journal of Futures Markets, 40 (12). pp. 1825-1860. ISSN 0270-7314 (https://doi.org/10.1002/fut.22155)

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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.

ORCID iDs

Kang, Jangkoo and Kwon, Kyung Yoon ORCID logoORCID: https://orcid.org/0000-0002-6212-8187;
CORE (COnnecting REpositories)