Empirical Relationships in the Commodity Futures Markets as of Early 2014

34 Pages Posted: 9 Jan 2016

See all articles by Hilary Till

Hilary Till

Premia Research LLC; EDHEC-Risk Institute; J.P. Morgan Center for Commodities, University of Colorado Denver Business School; Global Commodities Applied Research Digest

Date Written: February 28, 2014

Abstract

This article revisits a number of empirical relationships in the oil and commodity index futures markets. For example, the article examines how to put roll yields in proper perspective, which is that they are most properly seen as predictive of future returns over sufficiently long timeframes. But what then drives roll yields? The article examines this question primarily within the crude oil futures markets since, at least historically, oil has been the key return-generator and diversification-driver for a number of commodity indices, but most especially for the S&P GSCI index.

The paper also briefly covers another structural feature of the commodity futures markets that has potential for generating returns, and that is the returns due to rebalancing the components of a commodity futures portfolio or index. The article concludes by showing examples of empirical analyses where the diversification and inflation-hedging potential of oil and commodity futures indices becomes most apparent.

Keywords: commodity futures, backwardation, returns, roll yield, oil market

JEL Classification: G1, G11, Q41

Suggested Citation

Till, Hilary, Empirical Relationships in the Commodity Futures Markets as of Early 2014 (February 28, 2014). Available at SSRN: https://ssrn.com/abstract=2712526 or http://dx.doi.org/10.2139/ssrn.2712526

Hilary Till (Contact Author)

Premia Research LLC ( email )

United States
312-583-1137 (Phone)
312-873-3914 (Fax)

HOME PAGE: http://customindices.spindices.com/custom-index-calculations/premia/all

EDHEC-Risk Institute

Nice
France

HOME PAGE: http://risk.edhec.edu/

J.P. Morgan Center for Commodities, University of Colorado Denver Business School ( email )

1475 Lawrence St.
Denver, CO 80202
United States

HOME PAGE: http://www.business.ucdenver.edu/commodities

Global Commodities Applied Research Digest ( email )

J.P. Morgan Center for Commodities
1475 Lawrence Street
Denver, CO 80202
United States

HOME PAGE: http://www.jpmcc-gcard.com/hilary-till

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