Abstract

https://ssrn.com/abstract=2610772
 
 

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Facts and Fantasies About Commodity Futures Ten Years Later


Geetesh Bhardwaj


SummerHaven Investment Management

Gary B. Gorton


Yale School of Management; National Bureau of Economic Research (NBER)

K. Geert Rouwenhorst


Yale School of Management - International Center for Finance

May 25, 2015


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.

Number of Pages in PDF File: 31

Keywords: Futures Trading, Contango, Backwardation, Basis, Speculators, Hedgers, Risk Premium, Financialization, Time-varying Correlations

JEL Classification: G2, G13, G15, N2, E44, Q11


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Date posted: May 27, 2015  

Suggested Citation

Bhardwaj, Geetesh and Gorton, Gary B. and Rouwenhorst, K. Geert, Facts and Fantasies About Commodity Futures Ten Years Later (May 25, 2015). Available at SSRN: https://ssrn.com/abstract=2610772 or http://dx.doi.org/10.2139/ssrn.2610772

Contact Information

Geetesh Bhardwaj
SummerHaven Investment Management ( email )
Soundview Plaza,
1266 East Main Street
Stamford, CT 06902
United States
Gary B. Gorton
Yale School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203 432-8931 (Fax)
HOME PAGE: http://mba.yale.edu/faculty/profiles/gorton.shtml
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
K. Geert Rouwenhorst (Contact Author)
Yale School of Management - International Center for Finance ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-6046 (Phone)
203-432-8931 (Fax)
HOME PAGE: http://som.yale.edu/~geert/

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