The First Commodity Futures Index of 1933

23 Pages Posted: 20 Sep 2019 Last revised: 28 Oct 2020

See all articles by Geetesh Bhardwaj

Geetesh Bhardwaj

SummerHaven Investment Management

Rajkumar Janardanan

SummerHaven Investment Management

K. Geert Rouwenhorst

Yale School of Management - International Center for Finance

Date Written: September 19, 2019

Abstract

We document the properties of the first diversified commodity futures index introduced by the Dow Jones Company in 1933, and use its live track record to study the properties of the asset class in an experimental setting that does not suffer from backfill, selection, or survivorship biases. Despite the setbacks posed by contract failure and trading suspensions of several index constituents, the index appreciated by 3.7% per year between 1933 and 1998, while an investment in collateralized front-month futures returned 4.5% in excess of the risk-free rate. We quantify the impact of trading suspensions and contract failure on the estimates of the risk premium.

Keywords: Commodity Futures, Risk Premium, Indexation, Index Investing, Survivorship, Backtesting

JEL Classification: G13, N2

Suggested Citation

Bhardwaj, Geetesh and Janardanan, Rajkumar and Rouwenhorst, K. Geert, The First Commodity Futures Index of 1933 (September 19, 2019). Available at SSRN: https://ssrn.com/abstract=3451443 or http://dx.doi.org/10.2139/ssrn.3451443

Geetesh Bhardwaj

SummerHaven Investment Management ( email )

Soundview Plaza,
1266 East Main Street
Stamford, CT 06902
United States

Rajkumar Janardanan

SummerHaven Investment Management ( email )

Soundview Plaza,
1266 East Main Street
Stamford, CT 06902
United States

K. Geert Rouwenhorst (Contact Author)

Yale School of Management - International Center for Finance ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-6046 (Phone)
203-432-8931 (Fax)

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