Journal article
Commodity betas with mean reverting output prices
Abstract
This paper provides a theoretical derivation of commodity beta (stock price sensitivity to commodity price) using a contingent-claim model. The model incorporates operating leverage, financial leverage, costly financial distress, and mean reverting commodity prices; and highlights the important role played by the speed of reversion of the commodity price. It is used to identify theoretically the main determinants of commodity beta. Commodity …
Authors
Hong G; Sarkar S
Journal
Journal of Banking & Finance, Vol. 32, No. 7, pp. 1286–1296
Publisher
Elsevier
Publication Date
July 2008
DOI
10.1016/j.jbankfin.2007.10.009
ISSN
0378-4266