Basu, P. and Gavin, W.T. (2016) 'Negative correlation between stock and futures returns : an unexploited hedging opportunity?', Bulletin of economic research., 69 (3). pp. 209-215.
Abstract
The negative correlation between equity and commodity futures returns is widely perceived by investors as an unexploited hedging opportunity. A Lucas (1982) asset-pricing model is adapted to analyse the fundamentals driving equity and commodity futures returns. Using the model we argue that such a negative correlation could arise as an equilibrium relationship which reflects traders' perceptions about the shocks driving the fundamentals such as energy and consumables, and does not necessarily indicate any hedging opportunity.
| Item Type: | Article |
|---|---|
| Full text: | (AM) Accepted Manuscript Download PDF (126Kb) |
| Status: | Peer-reviewed |
| Publisher Web site: | https://doi.org/10.1111/boer.12090 |
| Publisher statement: | This is the accepted version of the following article: Basu, P. & Gavin, W.T. (2016). Negative Correlation between Stock and Futures Returns: An Unexploited Hedging Opportunity? Bulletin of Economic Research, which has been published in final form at https://doi.org/10.1111/boer.12090. This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving. |
| Date accepted: | 16 April 2016 |
| Date deposited: | 26 April 2016 |
| Date of first online publication: | 14 June 2016 |
| Date first made open access: | 14 December 2017 |
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