Commodities for the Long Run

40 Pages Posted: 7 Nov 2016

See all articles by Ari Levine

Ari Levine

AQR Capital Management

Yao Hua Ooi

AQR Capital Management, LLC

Matthew P. Richardson

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); AQR Capital Management, LLC

Multiple version iconThere are 2 versions of this paper

Date Written: November 2016

Abstract

This paper analyzes a novel data set of commodity futures prices over a long sample period starting in 1877, which allows us to shed new light on several important and controversial questions. We document that commodity futures returns (1) have been positive on average; (2) vary significantly across business cycles, inflation episodes, and periods of backwardation versus contango, (3) are driven mostly by variation of spot returns and therefore closely linked to the underlying commodity spot market; (4) perform well during inflation cycles and provide more return in backwardated states; and (5) display low correlation with stocks and bonds. These long-run stylized facts imply that commodity futures can add value to a diversified portfolio from an asset allocation perspective.

Suggested Citation

Levine, Ari and Ooi, Yao Hua and Richardson, Matthew P., Commodities for the Long Run (November 2016). NBER Working Paper No. w22793. Available at SSRN: https://ssrn.com/abstract=2865531

Ari Levine (Contact Author)

AQR Capital Management ( email )

Greenwich, CT
United States
2037423851 (Phone)

Yao Hua Ooi

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Matthew P. Richardson

New York University (NYU) - Department of Finance ( email )

44 West 4th Street
Suite 9-190
New York, NY 10012-1126
United States
212-998-0349 (Phone)
212-995-4233 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
42
Abstract Views
640
PlumX Metrics