The ICMA Centre’s Professor Chris Brooks has won a best paper award for his research, “Commodity risks and the cross-section of equity returns”.
The paper was published in the British Accounting Review in 2016, and was awarded the prize by the periodical following a vote by its editorial board members. The journal is the official outlet of the British Accounting and Finance Association
The study, co-authored with Joëlle Miffre, Ogonna Nneji (both former lecturers at the ICMA Centre), and Adrian Fernandez-Perez, shows that firms which are exposed to the risk that commodity prices may rise command a risk premium over those which do not have such exposures. Commodity price rises increase the production costs of resource-using firms and reduce the purchasing power of consumers, thus lowering demand for companies’ products. The research employs commodity futures prices which enables the evaluation of whether resource prices are expected to increase or reduce in the future, and their likely effect on share prices. The findings suggest that commodity risk cannot be fully hedged away and is pervasive throughout stock markets rather than being relevant to only a handful of intensive using firms.
Professor Brooks commented: “It is a great pleasure to have won this award. Only two papers published in the journal are selected for the prize every year, and I am very honoured that the British Accounting Review have chosen us.”
The published paper details can be found at http://centaur.reading.ac.uk/59125/ , while the pre-published working paper version is available for download from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2490347