 Commodity InvestingAnnual Review of Financial Economics, 2012, vol. 4, issue 1, 447-467 Abstract: 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. Keywords: commodity futures; theory of storage; theory of normal backwardation; risk premium; trader positions (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:anr:refeco:v:4:y:2012:p:447-467 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Annual Review of Financial Economics from Annual Reviews Annual Reviews 4139 El Camino Way Palo Alto, CA 94306, USA. |
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