Returns to Investing in Commodity Futures: Separating the Wheat from the Chaff

Scott H. Irwin, Dwight R. Sanders, Aaron Smith and Scott Main

Applied Economic Perspectives and Policy, 2020, vol. 42, issue 4, 583-610

Abstract: Commodity futures investment grew rapidly after its popularity exploded in the mid‐2000s. However, real‐time performance has been disappointing. Our analysis shows that the disappointing commodity returns were not driven mechanically by contango or negative “roll yields.” We show that the expected return to individual commodity futures is near zero before expenses, which implies net losses (before interest earnings) will be equal to order execution and operating costs estimated at 3%–4% per year. Finally, it is likely that rapid increases in commodity prices during 2004–2008 skewed investor return expectations upward much like it did in the early 1970s.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.1002/aepp.13049

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:apecpp:v:42:y:2020:i:4:p:583-610

Access Statistics for this article

More articles in Applied Economic Perspectives and Policy from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().