Holding a commodity futures index fund in a globally diversified portfolio: A placebo effect?
An increasing number of investors are including futures-based commodity index funds in their portfolios. The argument is that these funds increase diversification, enhance returns and serve as an inflation hedge. Much of the recent literature served to reinforce these ideas. We update the literature by examining recent data on returns and volatility. We further extend the literature by comparing the efficient frontiers of globally diversified stock and bond portfolios with and without the inclusion of futures index funds. We find little difference between the portfolios. Additionally, the returns from such funds do not appear significantly different than zero. They also lag the returns on spot commodities which have lagged inflation over the long haul.
Volume (Year): 30 (2010)
Issue (Month): 3 ()
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- Ke Tang & Wei Xiong, 2010. "Index Investment and Financialization of Commodities," NBER Working Papers 16385, National Bureau of Economic Research, Inc.
- Gary B. Gorton & Fumio Hayashi & K. Geert Rouwenhorst, 2013.
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- Gary Gorton & Fumio Hayashi & K. Rouwenhorst, 2007. "The Fundamentals of Commodity Futures Returns," Yale School of Management Working Papers amz2605, Yale School of Management, revised 01 Oct 2008.
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- Geetesh Bhardwaj & Gary Gorton & K. Rouwenhorst, 2008. "Fooling Some of the People All of the Time: The Inefficient Performance and Persistence of Commodity Trading Advisors," Yale School of Management Working Papers amz2429, Yale School of Management.
- Geetesh Bhardwaj & Gary B. Gorton & K. Geert Rouwenhorst, 2008. "Fooling Some of the People All of the Time: The Inefficient Performance and Persistence of Commodity Trading Advisors," NBER Working Papers 14424, National Bureau of Economic Research, Inc.
- Garrett, Ian & Taylor, Nick, 2001. "Portfolio Diversification and Excess Comovement in Commodity Prices," Manchester School, University of Manchester, vol. 69(4), pages 351-368, September. Full references (including those not matched with items on IDEAS)
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