Facts and Fantasies about Commodity Futures
AbstractWe construct an equally-weighted index of commodity futures monthly returns over the period between July of 1959 and March of 2004 in order to study simple properties of commodity futures as an asset class. Fully-collateralized commodity futures have historically offered the same return and Sharpe ratio as equities. While the risk premium on commodity futures is essentially the same as equities, commodity futures returns are negatively correlated with equity returns and bond returns. The negative correlation between commodity futures and the other asset classes is due, in significant part, to different behavior over the business cycle. In addition, commodity futures are positively correlated with inflation, unexpected inflation, and changes in expected inflation.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10595.
Date of creation: Jun 2004
Date of revision:
Publication status: published as Gorton, Gary and K. Geert Rouwenhorst. "Facts And Fantasies About Commodity Futures," Financial Analysts Journal, 2006, v62(2,Mar/Apr), 47-68.
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Other versions of this item:
- Gary Gorton & K. Rouwenhorst, 2004. "Facts and Fantasies about Commodity Futures," Yale School of Management Working Papers, Yale School of Management amz2619, Yale School of Management, revised 01 Mar 2005.
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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