Facts and Fantasies about Commodity Futures

This research examines an equally-weighted index of commodity futures monthly returns over the period from July 1959 to December 2004.

The study finds that fully-collateralized commodity futures have historically offered the same return and Sharpe ratio as U.S.

equities, but with negative correlation to other asset classes.

The authors demonstrate that commodity futures are positively correlated with inflation, unexpected inflation, and changes in expected inflation, making them valuable for portfolio diversification and hedging purposes.