After the financialization of commodity futures markets in 2004-05 oil volatility has become a strong predictor of returns and volatility of the overall stock market. Furthermore, stocks' exposure to oil volatility risk now drives the cross-section of expected returns. The difference in average...

What can we learn about a physical commodity by studying its hedging characteristics? We use a hedging study to shed light on important properties of ethanol (a developing market) and corn (a mature market). Our three primary innovations are empirical, with implications for all storable...

This study analyzes the relationships of commodity spot and futures prices with convenience yield. Convenience yield is received by the owner of a spot commodity but not by the owner of the right to the commodity (e.g., futures). This is the first study to explicitly model commodity spot and...

We derive a general joint affine term structure model of US government bond yields and the convenience yields on physical commodities. We apply this framework separately to oil and gold. Our results show clear links between bond and commodity markets, since bond factors play a significant role...

We propose a novel representation of commodity spot prices in which the cost-of-carry and the spot price volatility are both driven by an arbitrary number of risk factors, nesting many existing specifications. The model exhibits unspanned stochastic volatility, provides simple closed-form...

We study the links between expectations, fundamentals, and asset returns using the rich empirical setup offered by commodity markets. We find that survey-based expectations predict future fundamentals, but are not significant predictors of future returns. Expectations of returns are correlated...

We consider a market model that consists of financial investors and producers of a commodity. Producers optionally store some production for future sale and go short on forward contracts to hedge the uncertainty of the future commodity price. Financial investors take positions in these contracts...

​We develop and estimate a multifactor affine model of commodity futures that allows for stochastic variations in seasonality. We show conditions under which the yield curve and the cost-of-carry curve adopt augmented Nelson and Siegel functional forms. This restricted version of the model is...

It is widely debated whether financial speculation was a significant force behind recent food price fluctuations. As a matter of fact, during the 2000s agricultural commodity derivatives markets were flooded by a ‘wall of money' coming from financial investors. In agricultural exchanges, the...

We show that exposure to the risk of kurtosis in oil market drives the cross-section of stock returns from 1996 to 2014. The average monthly difference between the return of portfolio of stocks with low exposure and high exposure to the risk of kurtosis is -0.37%, showing that higher exposure to...