Abstract
© 2020 Elsevier Inc. This paper investigates whether economic policy uncertainty is predictable using three sets of commodity futures market variables, namely the equal-weighted average of futures excess returns, the excess returns on a portfolio of going long in backwardated commodities, and the excess returns on a portfolio of going short in contango commodities as predictors. We find significant evidence of both in-sample and out-of-sample predictability. Combination forecasts also reveal strong evidence of predictability. Our findings remain unchanged following several robustness tests.
Keywords
Backwardation, Commodity markets, Contango, Policy uncertainty, Predictability
Document Type
Journal Article
Date of Publication
3-31-2021
Volume
72
Publication Title
International Review of Economics and Finance
Publisher
Elsevier
School
School of Business and Law
RAS ID
32515
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.
First Page
364
Last Page
383
Included in
Behavioral Economics Commons, Business Analytics Commons, Econometrics Commons, Law and Economics Commons, Statistics and Probability Commons
Comments
This is an author's accepted manuscript of: Bannigidadmath, D., & Narayan, P. K. (2021). Commodity futures returns and policy uncertainty. International Review of Economics & Finance, 72, 364-383. https://doi.org/10.1016/j.iref.2020.11.009