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Commodities - November 04, 2015

Joëlle Miffre to present a paper on the skewness of commodity futures returns at the 9th International Conference on Computational and Financial Econometrics

Joelle Miffre, Professor of Finance at EDHEC Business School, and member of EDHEC-Risk Institute will be organising a session on "Commodity Markets: Pricing and Trading" at the 9th International Conference on Computational and Financial Econometrics to be held on 12-14 December, 2015 at the University of London.

At the session, Professor Miffre will be presenting a paper entitled, "The skewness of commodity futures returns", co-authored with Ana-Maria Fuertes, Adrian Fernandez-Perez and Bart Frijns. The paper explores the relationship between skewness of the distribution of past returns and expected returns in commodity futures markets. Both time-series tests and cross-sectional tests indicate that more positively skewed commodities accrue significantly lower mean excess returns. Sorting a cross-section of commodities by their past skewness, the paper demonstrates that a fully collateralized portfolio that buys commodities with the most negative skewness and shorts commodities with the most positive skewness earns an excess return of 8.01$\%$ a year. A commodity pricing model that utilizes as risk factors the excess returns of a long-only equally-weighted portfolio of all commodities, alongside term structure, momentum, and hedging pressure portfolios yields a significant alpha of 6.58$\%$ obtained which indicates that the profitability of skewness portfolios is not a mere manifestation of backwardation and contango risk. Skewness risk may uniquely relate to the preferences of investors for lottery-like commodity futures. The findings are robust to transaction costs, liquidity considerations and sample periods.

Joëlle Miffre has also been invited to present her research at a webinar organised by ESSEC Business School in Paris on 24 February, 2016, entitled "Commodities as Lotteries: Skewness and the Returns of Commodity Futures".

Professor Miffre's research focuses on the management and pricing of commodities and equities. Her articles are published in academic journals such as the Journal of Banking and Finance, sponsored by financial market participants (CME Group, INQUIRE) and cited in the financial press (The Economist, The Financial Times, etc.). Joëlle acts as associate editor to the Journal of Banking and Finance and the International Review of Financial Analysis and was scientific advisor to a CTA.