Facts and Fantasies about Commodity Futures Ten Years Later

Geetesh Bhardwaj (), Gary Gorton and K. Rouwenhorst

No 21243, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Gorton and Rouwenhorst (2006) examined commodity futures returns over the period July 1959 to December 2004 based on an equally-weighted index. They found that fully collateralized commodity futures had historically offered the same return and Sharpe ratio as U.S. equities, but were negatively correlated with the return on stocks and bonds. Reviewing these results ten years later, we find that our conclusions largely hold up out-of-sample. The in- and out-of-sample average commodity risk premiums are not significantly different, nor is the cross-sectional relationship between average returns and the basis. Correlations among commodities and commodity correlations with other assets experienced a temporary increase during the financial crisis which is in line with historical experience of variation of these correlations over the business cycle.

JEL-codes: G1 G11 G12 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-fmk, nep-his and nep-rmg
Note: AP
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