Click to login and read the full article.
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600
Abstract
To what extent are financial market returns predictable? Standard approaches to asset pricing make strong parametric assumptions that undermine their return-predicting ability. The authors employ tree-based methods to overcome these limitations and attempt to approximate an upper bound for the predictability of returns in commodities futures markets. Out of sample, they find that up to 3.74% of 1-month returns are predictable—more than a 10-fold increase from standard approaches. The findings hint at the importance multiway interactions and nonlinearities acquire in the data; they imply that new factors should be tested on their ability to add explanatory power to an ensemble of existing factors.
TOPICS: Futures and forward contracts, commodities
Key Findings
• Standard approaches to asset pricing make strong parametric assumptions that undermine their return-predicting ability.
• The authors employ tree-based methods to overcome these limitations and estimate the predictability of returns in commodities futures markets.
• Out of sample, they find that up to 3.74% of 1-month returns are predictable—more than a 10-fold increase from standard approaches.
- © 2020 Pageant Media Ltd
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600