Does Speculation in Futures Markets Improve Commodity Hedging Decisions?

This paper presents a comprehensive analysis of traditional versus selective hedging strategies in commodity futures markets. Traditional hedging aims solely to reduce spot price risk, whereas selective hedging also seeks to enhance returns by predicting movements in commodity futures prices. We construct selective hedges using a range of forecasting techniques, from simple historical averages to advanced machine learning models, and evaluate their performance based on the expected mean-variance utility of hedge portfolio returns. Out-of-sample results for 24 commodities do not favor selective hedging over traditional hedging as the former increases risk without delivering additional returns. These findings are robust across various hedge reformulations, expanding estimation windows, and rebalancing frequencies. This paper was accepted by Lukas Schmid, finance. Funding: This research was supported by grants from Audencia Business School and Auckland University of Technology, awarded during A. Fernandez-Perez’s prior tenure. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2024.04940 .

• 저널Management Science · 72(3) · 2525–2544
• 토픽Market Dynamics and Volatility · Economics and Econometrics
• DOI10.1287/mnsc.2024.04940
• 저자Adrián Fernández-Pérez, Ana-Marı́a Fuertes, Joëlle Miffre