The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Basis‐Momentum
Published: 10/24/2018 | DOI: 10.1111/jofi.12738
MARTIJN BOONS, MELISSA PORRAS PRADO
We introduce a return predictor related to the slope and curvature of the futures term structure: basis‐momentum. Basis‐momentum strongly outperforms benchmark characteristics in predicting commodity spot and term premiums in both the time series and the cross section. Exposure to basis‐momentum is priced among commodity‐sorted portfolios and individual commodities. We argue that basis‐momentum captures imbalances in the supply and demand of futures contracts that materialize when the market‐clearing ability of speculators and intermediaries is impaired, and that it represents compensation for priced risk. Our findings are inconsistent with alternative explanations based on storage, inventory, and hedging pressure.