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Prices of Risk Estimation for Commodity Factors

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Analysis reveals significant prices of risk for commodity factors, indicating insights into portfolio performance.

Prices of risk for commodity basis and value factors are notably 1.2% and 2.0% per month, respectively.
The study identifies that commodity factors do not price cross-sectional equity portfolios, affecting overall returns.
Utilizing a three-pass regression approach, analysis demonstrates robustness to model specification.
The findings suggest that financialization is increasing the association between equity market and commodity futures portfolios.

Nakagawa et al. (2025) studied this question.

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