Volatility risk premia and future commodities returns

Analyze the predictive ability of Commodities Currencies VRP and commodities VRP.
  • 11 Abril 2017

José Renato Haas Ornelas and Roberto Baltieri Mauad

BIS Working Papers No 619, March 2017.

Abstract:

This paper extends the empirical literature on Volatility Risk Premium (VRP) and future returns by analyzing the predictive ability of Commodities Currencies VRP and commodities VRP. The empirical evidence throughout this paper provides support for a positive relationship of Commodities Currencies VRP and future commodities returns, but only for the period after the 2008 Global Financial Crisis. This predictability survives to the inclusion of control variables like the Equity VRP and past currency returns. Furthermore, we find a negative relationship between Gold VRP and future commodities and currency returns. This result corroborates the view of Gold as a safe haven asset.

Descargar paper.