Volatility risk premia and future commodities returns

This paper extends the empirical literature on volatility risk premium (VRP) and future returns by analysing the predictive ability of commodity currency VRP and commodity VRP. The empirical evidence throughout this paper provides support for a positive relationship of commodity currencies VRP and f...

Full description

Saved in:
Bibliographic Details
Published in:Policy File 2017
Main Authors: Haas Ornelas, Jose Renato, Baltieri Mauad, Roberto
Format: Report
Language:English
Subjects:
Bank for International Settlements
Banking/Finance
Economic policy
Online Access:Request full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper extends the empirical literature on volatility risk premium (VRP) and future returns by analysing the predictive ability of commodity currency VRP and commodity VRP. The empirical evidence throughout this paper provides support for a positive relationship of commodity currencies VRP and future commodity returns, but only for the period after the 2008 global financial crisis. This predictability survives the inclusion of control variables like equity VRP and past currency returns. Furthermore, gold VRP also has the ability to predict future commodity returns. However, this predictability is restricted to precious metals when control variables are considered.