LAUSR

Abstract This paper is the first to examine the dynamic impact of temperature anomaly and macroeconomic fundamentals on agricultural commodity futures returns. Using a quantile regression approach, we report that temperature anomaly exerts a significant negative (positive) impact on returns of soybean, corn, cotton, and coffee (soybean, corn, and cocoa) futures in extreme bearish and bullish market conditions. Moreover, agricultural commodity futures returns appear to positively respond to aggregate stock returns and negatively influenced by exchange rate changes. However, such results vary across quantiles. We also report that economic activities and various uncertainty measures do not have a strong impact on the returns of agricultural commodity futures. Our study suggests that an adjustment in risk evaluation encompassing weather shocks would benefit portfolio management.