Return and Risk in Commodity Futures Programs
22 Pages Posted: 20 May 2015
Date Written: May 19, 2006
This paper discusses how commodity returns had in the past mainly relied on portfolio effects and term-structure properties of individual commodity futures contracts. But the paper also notes that rare trend shifts, as occurred in the early 1970’s, can also be a meaningful source of returns for an investor. In addition, the paper discusses some of the dynamic correlation properties of commodity futures contracts. Finally, the paper examines the prospects of the main constituent of the dominant commodity index – oil – and provides a framework for understanding what could potentially drive future returns.
Keywords: commodity futures, returns, risk, portfolio
JEL Classification: G1, G11
Suggested Citation: Suggested Citation