Journal Article

New Evidence on Agricultural Commodity Return Performance under Time-Varying Risk

Bruce Bjornson and Colin A. Carter

in American Journal of Agricultural Economics

Published on behalf of Agricultural and Applied Economics Association

Volume 79, issue 3, pages 918-930
Published in print August 1997 | ISSN: 0002-9092
Published online August 1997 | e-ISSN: 1467-8276 | DOI: http://dx.doi.org/10.2307/1244432
New Evidence on Agricultural Commodity Return Performance under Time-Varying Risk

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Holding commodity stocks is a major investment that commodity producers, merchants, and processors must continually manage. In this paper we study the conditional risk and return characteristics of commodities. We use a generalized method of moments estimator in a model of conditional expected returns under a single-beta asset pricing theory framework, allowing both the risk premium and the beta to vary with time. We find that expected returns to commodities are lower during times of high interest rates, expected inflation, and economic growth. This suggests that commodities provide a natural hedge against business cycles.

Keywords: commodity market returns; conditional asset pricing; risk premia; G120; Q110

Journal Article.  0 words. 

Subjects: Economics ; Agricultural Economics

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