Commodity Futures

We occasionally select for retrospective review an all-time “best selling” research paper from the past few years from the General Financial Markets category of the Social Science Research Network (SSRN). Here we summarize the February 2005 paper entitled “Facts and Fantasies About Commodity Futures” (download count over 12,000) by Gary Gorton and Geert Rouwenhorst. Commodity futures are derivative, short-maturity claims on real assets. Many commodities have pronounced price/volatility seasonality. In this paper, the authors compare and contrast the basic properties of commodity futures, equities and corporate bonds. Using monthly returns for stocks (the S&P 500 index), corporate bonds and a broad equally-weighted index of for commodity futures over the period July 1959 through December 2004, they conclude that: Keep Reading