In this paper, we use a recently introduced asymmetry measure, IE (Jiang, Wu, Zhou, and Zhu, 2020), to measure the idiosyncratic asymmetry of commodity futures returns and find that idiosyncratic asymmetry negatively and significantly predicts commodity futures returns cross-sectionally. Furthermore, we find that a long/short trading strategy based on the idiosyncratic asymmetry generates significant abnormal returns, which cannot be explained by the traditional risk factors in commodity futures and persists up to 12 months. Moreover, idiosyncratic asymmetry appears to be a priced factor in the commodity futures with significant risk premium. Finally, we confirm that IE is better at capturing the pricing effect of idiosyncratic asymmetry than the traditional skewness measure.

Keywords: Idiosyncratic asymmetry; Cross section; Commodity futures returns; IE

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