In this paper, we examine the relationship between oil price and firm returns for 560 US firms listed on the NYSE. First, we find that oil price affects returns of firms differently depending on their sectoral location. Second, we find strong evidence of lagged effect of oil price on firm returns. Third, we test whether oil price affects firm returns based on different regimes and find that in five out of the 14 sectors this is indeed the case. Finally, we unravel that oil price affects firm returns differently based on firm size, implying strong evidence of size effects.

In this paper we study whether the commodity futures market predicts the commodity spot market. Using historical daily data on four commodities—oil, gold, platinum, and silver—we find that they do. We then show how investors can use this information on the futures market to devise trading strategies and make profits. In particular, dynamic trading strategies based on a mean–variance investor framework produce somewhat different results compared with those based on technical trading rules. Dynamic trading strategies suggest that all commodities are profitable and profits are dependent on structural breaks. The most recent global financial crisis marked a period in which commodity profits were the weakest.