Two Centuries of Commodity Futures Premia: Momentum, Value and Basis
28 Pages Posted: 26 Feb 2019
Date Written: February 17, 2019
Using hand-collected data of commodity futures contracts going back to 1877, we replicate in the pre-sample history the well-documented cross-sectional commodity factor premia of momentum, value and basis. All three premia remain significantly positive in the additional 80-plus years of pre-sample data. Compared to a long-only passive basket of commodity futures, a long-only premia portfolio more than doubles its Sharpe in both the early and recent samples, suggesting a more optimal way to obtain portfolio’s commodity exposure while maintaining its beneficial inflation hedging property.
Keywords: Commodity Futures, Long-Run Research, Momentum, Value, Basis
JEL Classification: G10, G11, G12, G13, G14
Suggested Citation: Suggested Citation