The authors document the returns to a broadly diversified index of commodity futures over more than 150 years of U.S. market history. They find that commodity futures have earned an average annual risk premium of 5.4% over the risk-free rate and a premium over US inflation of more than 6% per annum.
An Index of Commodity Futures Returns Since 1871
Research
22 Pages
Key Takeaways
Diversification Benefits: Commodity futures have outperformed equities in roughly 43% of years and in two out of every five decades, suggesting distinct return drivers and meaningful diversification benefits.
Risk Premium: Futures returns have exceeded spot price returns on an interest-adjusted basis, consistent with the presence of a risk premium beyond spot price appreciation.
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