Facts and Fantasies about Commodity Futures Ten Years Later / Geetesh Bhardwaj, Gary Gorton, Geert Rouwenhorst.

Format:

Book

Author/Creator:

Bhardwaj, Geetesh.

Contributor:

National Bureau of Economic Research.

Gorton, Gary.

Rouwenhorst, Geert.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21243.

NBER working paper series no. w21243

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

Gorton and Rouwenhorst (2006) examined commodity futures returns over the period July 1959 to December 2004 based on an equally-weighted index. They found that fully collateralized commodity futures had historically offered the same return and Sharpe ratio as U.S. equities, but were negatively correlated with the return on stocks and bonds. Reviewing these results ten years later, we find that our conclusions largely hold up out-of-sample. The in- and out-of-sample average commodity risk premiums are not significantly different, nor is the cross-sectional relationship between average returns and the basis. Correlations among commodities and commodity correlations with other assets experienced a temporary increase during the financial crisis which is in line with historical experience of variation of these correlations over the business cycle.

Notes:

Print version record

June 2015.