{"title":"Optimal Versus Naive Diversification in Commodity Futures Markets","authors":"Max Heide, Benjamin R. Auer, Frank Schuhmacher","doi":"10.1002/fut.22550","DOIUrl":"https://doi.org/10.1002/fut.22550","url":null,"abstract":"<div>\u0000 \u0000 <p>Motivated by the ongoing debate on whether optimal or naive diversification should be preferred when distributing wealth across investment alternatives, this article investigates how the choice of covariance estimator affects mean-variance portfolio selection. In an environment tailored to ideal tradability, we construct optimal commodity futures portfolios based on 12 promising covariance matrix estimators and compare their out-of-sample investment performance to a simple, equally weighted investment strategy by means of bootstrap testing. We find that neither the naive allocation approach nor the advanced covariance estimators can outperform the traditional sample covariance matrix. Because this empirical result is robust to modifications of the research design (including alternative investigation periods, data frequencies, estimation window sizes, holding period lengths, weight constraint specifications, and transaction cost levels), it opposes the recurrent suggestion of the equity-oriented literature that the sample covariance matrix should not be used for the purpose of portfolio optimization.</p>\u0000 </div>","PeriodicalId":15863,"journal":{"name":"Journal of Futures Markets","volume":"45 1","pages":"3-22"},"PeriodicalIF":1.8,"publicationDate":"2024-09-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142862022","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Frequent Trading and Investment Performance: Evidence From the KOSPI 200 Futures Market","authors":"Doojin Ryu, Robert I. Webb, Jinyoung Yu","doi":"10.1002/fut.22552","DOIUrl":"10.1002/fut.22552","url":null,"abstract":"<div>\u0000 \u0000 <p>This study explores whether frequent trading is profitable to investors in an emerging stock index futures market. Our analyses, based on long-term data from 2010 to 2023, indicate that the effect of trading frequency differs across investor types and market conditions. Only some domestic institutions gain additional profits from more frequent trading, and such a tendency is apparent when the futures price falls and when the futures market volatility is low. Foreign investors experience losses as they trade more when the market is bearish and are frequently net long. The performance of domestic individuals does not depend on their trading frequency in general; however, they lose more from trading when the market is bearish and when the market is less volatile.</p>\u0000 </div>","PeriodicalId":15863,"journal":{"name":"Journal of Futures Markets","volume":"44 12","pages":"1911-1922"},"PeriodicalIF":1.8,"publicationDate":"2024-09-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142223678","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Journal of Futures Markets: Volume 44, Number 10, October 2024","authors":"","doi":"10.1002/fut.22436","DOIUrl":"https://doi.org/10.1002/fut.22436","url":null,"abstract":"","PeriodicalId":15863,"journal":{"name":"Journal of Futures Markets","volume":"44 10","pages":"1579"},"PeriodicalIF":1.8,"publicationDate":"2024-09-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/fut.22436","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142165241","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
José Carlos Dias, João Pedro Vidal Nunes, Fernando Correia da Silva
{"title":"Novel Analytic Representations for Caps, Floors, Collars, and Exchange Options on Continuous Flows, Arbitrage-Free Relations, and Optimal Investments","authors":"José Carlos Dias, João Pedro Vidal Nunes, Fernando Correia da Silva","doi":"10.1002/fut.22549","DOIUrl":"10.1002/fut.22549","url":null,"abstract":"<div>\u0000 \u0000 <p>We offer analytic formulae for valuing finite maturity profit caps and floors that are contingent on continuous flows without the need for subtracting the risk-neutral expectation of the forward starting perpetual solution from the corresponding perpetual solution. The related price caps, floors, and collars are easily obtained from any analytic representation of profit caps and floors using some arbitrage-free relations. Finally, we offer two novel methods for calculating the optimal triggers of investment projects in the presence of price floors and collars regimes in a way that is much simpler than the ones currently used.</p>\u0000 </div>","PeriodicalId":15863,"journal":{"name":"Journal of Futures Markets","volume":"44 12","pages":"1869-1887"},"PeriodicalIF":1.8,"publicationDate":"2024-08-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142178800","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Uncovering the Sino-US Dynamic Risk Spillovers Effects: Evidence From Agricultural Futures Markets","authors":"Han-Yu Zhu, Peng-Fei Dai, Wei-Xing Zhou","doi":"10.1002/fut.22551","DOIUrl":"https://doi.org/10.1002/fut.22551","url":null,"abstract":"<div>\u0000 \u0000 <p>With economic globalization and the financialization of agricultural products continuing to advance, the interconnections between different agricultural futures have become closer. We utilize a TVP-VAR-DY model combined with the quantile method to measure the risk spillover between 11 agricultural futures in the United States and China from July 9, 2014, to December 31, 2022. We obtain several findings. First, CBOT corn, soybean, and wheat are identified as the primary risk transmitters, with DCE corn and soybean as the main risk receivers. Second, sudden events or increased economic uncertainty can enlarge the overall risk spillovers. Third, there is an aggregation of risk spillovers amongst agricultural futures based on the dynamic directional spillovers. Lastly, the central agricultural futures under the conditional mean are CBOT corn and soybean, while CZCE hard wheat and long-grained rice are the two risk-spillover centers in extreme cases, as per the results of the spillover network and minimum spanning tree.</p>\u0000 </div>","PeriodicalId":15863,"journal":{"name":"Journal of Futures Markets","volume":"44 12","pages":"1888-1910"},"PeriodicalIF":1.8,"publicationDate":"2024-08-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142642541","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Co-Jump Dependency and Transmission Across US Commodity Futures: A Network Analysis","authors":"Lei Zhang, Yan Chen, Elie Bouri","doi":"10.1002/fut.22547","DOIUrl":"10.1002/fut.22547","url":null,"abstract":"<div>\u0000 \u0000 <p>This paper examines the co-jump transmission in 20 commodity futures returns in the United States using co-jump network models. Specifically, it reveals co-jumping behavior in both static and time-varying settings, considering the overall commodity markets and various commodity groups separately, which helps us understand the dynamic changes in co-jump dependencies at the overall and sector levels. The main results reveal that co-jump heterogeneity exists among commodities but is generally more apparent within each commodity group, and co-jumps vary over time. Gold exerts the strongest influence, with many commodity futures being influenced by the jumps behavior in gold returns. During the COVID-19 outbreak and the Russia–Ukraine war, the energy group ranks highest in terms of co-jump network centrality. Our empirical analysis highlights the portfolio performance and risk reduction, and an additional examination shows that centrality information from the co-jump network contains a highly and statistically forecasting power for US stock market volatility.</p>\u0000 </div>","PeriodicalId":15863,"journal":{"name":"Journal of Futures Markets","volume":"44 12","pages":"1851-1868"},"PeriodicalIF":1.8,"publicationDate":"2024-08-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142178797","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Pricing VIX Futures and Options With Good and Bad Volatility of Volatility","authors":"Zhiyu Guo, Zhuo Huang, Chen Tong","doi":"10.1002/fut.22545","DOIUrl":"10.1002/fut.22545","url":null,"abstract":"<div>\u0000 \u0000 <p>This article studies the pricing of VIX futures and options by directly modeling the dynamics of VIX, based on realized semivariances computed from high-frequency data of VIX. We derive the closed-form pricing formula for both the VIX futures and options. The empirical results show that the new model provides superior pricing performance compared with the model based on conventional unsigned realized variance and the classic Heston-Nandi GARCH model, both in sample and out of sample. Our study confirms that the decomposition of realized variance into upside and downside components helps to improve the pricing performance for VIX futures and options.</p>\u0000 </div>","PeriodicalId":15863,"journal":{"name":"Journal of Futures Markets","volume":"44 11","pages":"1832-1847"},"PeriodicalIF":1.8,"publicationDate":"2024-08-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142178798","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Investor Sentiment, Unexpected Inflation, and Bitcoin Basis Risk","authors":"Thomas Conlon, Shaen Corbet, Les Oxley","doi":"10.1002/fut.22541","DOIUrl":"10.1002/fut.22541","url":null,"abstract":"<p>The introduction of regulated CME futures contracts on Bitcoin in 2017 raised an expectation that cryptocurrencies would become part of mainstream financial markets. This also heightened links between traditional markets and Bitcoin, implying that the cryptocurrency would be subject to systematic spillovers. This paper uses high-frequency data to examine whether Bitcoin basis risk is linked to investor sentiment from established financial markets. Our findings indicate that extreme investor sentiment, as reflected by the tail risk in various volatility indices, including the VIX, consistently correlates with a negative Bitcoin basis, where Bitcoin futures prices are lower than spot prices. Fluctuations significantly influence this relationship in the trading volume of Bitcoin futures and are more pronounced during periods of substantial unexpected inflation and deflation. These results underline the complex dynamics between market sentiment and cryptocurrency pricing, offering insights with substantial implications for investors and policymakers.</p>","PeriodicalId":15863,"journal":{"name":"Journal of Futures Markets","volume":"44 11","pages":"1807-1831"},"PeriodicalIF":1.8,"publicationDate":"2024-08-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/fut.22541","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142178799","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Journal of Futures Markets: Volume 44, Number 9, September 2024","authors":"","doi":"10.1002/fut.22435","DOIUrl":"10.1002/fut.22435","url":null,"abstract":"","PeriodicalId":15863,"journal":{"name":"Journal of Futures Markets","volume":"44 9","pages":"1463"},"PeriodicalIF":1.8,"publicationDate":"2024-08-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1002/fut.22435","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141931954","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"OA","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Asymptotic Dependence and Its Impact on Hedging Effectiveness: An Examination of Stock, Currency, and Commodity Futures","authors":"Udayan Sharma, Madhusudan Karmakar","doi":"10.1002/fut.22546","DOIUrl":"10.1002/fut.22546","url":null,"abstract":"<div>\u0000 \u0000 <p>This study measures the asymptotic dependence between spot and futures losses and investigates its impact on hedging effectiveness using data from stock, currency, and commodity markets. The findings reveal that stock futures contracts show strong asymptotic dependence, while currency futures have weak asymptotic dependence and most commodity futures lack asymptotic dependence with the underlying spots. Further, stock futures have the highest hedging effectiveness, while commodity and currency futures show low hedging effectiveness for downside risk. Results also suggest that asymptotic dependence is critical for minimum-variance hedging. Asymptotic dependence increases with the hedging horizon, leading to a better hedging performance of the futures. It also appears that the hedging strategies sensitive to asymptotic dependence perform better than the competing models. The results for the entire period and the subsample periods offer similar conclusions.</p>\u0000 </div>","PeriodicalId":15863,"journal":{"name":"Journal of Futures Markets","volume":"44 11","pages":"1750-1786"},"PeriodicalIF":1.8,"publicationDate":"2024-08-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141931955","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}