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Commodity Investing


  • K. Geert Rouwenhorst

    () (International Center for Finance, Yale School of Management, New Haven, Connecticut 06520-8200)

  • Ke Tang

    () (Hanqing Advanced Institute of Economics and Finance and School of Finance, Renmin University of China, Beijing 100872, China)


This article reviews the literature on commodities from the perspective of an investor. We re-examine some of the early papers in the literature using recent data and find that the empirical support for the theory of normal backwardation as an explanation for the commodity risk premium is weak and that the evidence is more consistent with storage decisions. We then review the behavior of the main participants in the commodity futures markets with a particular focus on their impact on prices. Although there is continued disagreement in the literature about the role of speculative activity, our results show that money managers are generally momentum (positive feedback) traders, while producers are net short and contrarian (negative feedback) traders. There is less evidence that index traders and swap dealers trade based on past futures returns.

Suggested Citation

  • K. Geert Rouwenhorst & Ke Tang, 2012. "Commodity Investing," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 447-467, October.
  • Handle: RePEc:anr:refeco:v:4:y:2012:p:447-467

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    Cited by:

    1. Michail Anthropelos & Michael Kupper & Antonis Papapantoleon, 2015. "An equilibrium model for spot and forward prices of commodities," Papers 1502.00674,, revised Jan 2017.
    2. Delbianco, Fernando & Tohmé, Fernando & Stosic, Tatijana & Stosic, Borko, 2016. "Multifractal behavior of commodity markets: Fuel versus non-fuel products," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 457(C), pages 573-580.
    3. Auer, Benjamin R., 2015. "Does the choice of performance measure influence the evaluation of commodity investments?," International Review of Financial Analysis, Elsevier, vol. 38(C), pages 142-150.
    4. Koch, Nicolas, 2014. "Tail events: A new approach to understanding extreme energy commodity prices," Energy Economics, Elsevier, vol. 43(C), pages 195-205.
    5. Kolodziej, Marek & Kaufmann, Robert K., 2013. "The role of trader positions in spot and futures prices for WTI," Energy Economics, Elsevier, vol. 40(C), pages 176-182.
    6. Fernandez-Perez, Adrian & Fuertes, Ana-Maria & Miffre, Joëlle, 2016. "Is idiosyncratic volatility priced in commodity futures markets?," International Review of Financial Analysis, Elsevier, vol. 46(C), pages 219-226.
    7. Haase, Marco & Seiler Zimmermann, Yvonne & Zimmermann, Heinz, 2016. "The impact of speculation on commodity futures markets – A review of the findings of 100 empirical studies," Journal of Commodity Markets, Elsevier, vol. 3(1), pages 1-15.
    8. Abdelkader Derbali & Tarek Chebbi, 2018. "Dynamic Equicorrelation between S&P500 Index and S&P GSCI," Working Papers hal-01695995, HAL.
    9. Basu, Devraj & Miffre, Joëlle, 2013. "Capturing the risk premium of commodity futures: The role of hedging pressure," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2652-2664.
    10. Ing-Haw Cheng & Wei Xiong, 2013. "The Financialization of Commodity Markets," NBER Working Papers 19642, National Bureau of Economic Research, Inc.
    11. repec:eee:jfpoli:v:69:y:2017:i:c:p:256-269 is not listed on IDEAS
    12. Miffre, Joëlle, 2016. "Long-short commodity investing: A review of the literature," Journal of Commodity Markets, Elsevier, vol. 1(1), pages 3-13.

    More about this item


    commodity futures; theory of storage; theory of normal backwardation; risk premium; trader positions;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing


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