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The Risk Premia of Energy Futures

Abstract : This paper studies the energy futures risk premia that can be extracted through long-short portfolios that exploit heterogeneities across contracts as regards various characteristics or signals and integrations thereof. Investors can earn a sizeable premium of about 8% and 12% per annum by exploiting the energy futures contract risk associated with the hedgers' net positions and roll-yield characteristics, respectively, in line with predictions from the hedging pressure hypothesis and theory of storage. Simultaneously exploiting various signals towards style-integration with alternative weighting schemes further enhances the premium. In particular, the style-integrated portfolio that equally weights all signals stands out as the most effective. The findings are robust to transaction costs, data mining and sub-period analyses.
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Contributor : Joelle Miffre Connect in order to contact the contributor
Submitted on : Tuesday, August 3, 2021 - 10:26:41 AM
Last modification on : Wednesday, August 4, 2021 - 3:28:57 AM


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Adrian Fernandez-Perez, Ana-Maria Fuertes, Joelle Miffre. The Risk Premia of Energy Futures. Energy Economics, 2021, ⟨10.1016/j.eneco.2021.105460⟩. ⟨hal-03312959⟩



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