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Convenience yield risk

Prokopczuk, M., Symeonidis, L. ORCID:, Wese Simen, C. ORCID: and Wichmann, R. ORCID: (2023) Convenience yield risk. Energy Economics, 120. 106536. ISSN 1873-6181

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To link to this item DOI: 10.1016/j.eneco.2023.106536


We develop a framework to quantify the convenience yield risk (CYR) inherent to each commodity futures market. Implementing our approach, we document that our novel CYR measure is informative about future commodity returns. In panel regressions, the CYR predicts future returns with a positive sign. Economically, a strategy that opens long positions in commodity markets with a higher than median CYR signal and sells the remaining commodities yields an average return of 6.93% per year. The performance of the CYR strategy cannot be explained by exposure to existing commodity strategies or other variables that capture changes in the investment opportunity set.

Item Type:Article
Divisions:Henley Business School > ICMA Centre
ID Code:110663

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