The First Commodity Futures Index of 1933
Posted: 20 Sep 2019 Last revised: 14 Dec 2019
Date Written: September 19, 2019
We document the properties of the first commodity futures index, the Dow Jones Commodity Futures Index, and use it as a historical laboratory experiment to study the pricing of commodity futures. Despite the setbacks posed by contract failure and trading suspensions of index constituents, the index earned a risk premium of 3.7% per year between 1933 and 1998. The index exhibits time-varying correlations with equities that are higher around economic downturns, and a correlation with inflation that are positive and exceed those of traditional assets.
Keywords: Commodity Futures, Risk Premium, Indexation, Index Investing
JEL Classification: G13, N2
Suggested Citation: Suggested Citation