Research and publications
Backwardation and Commodity Futures Performance: Evidence from Evolving Agricultural Markets
The recent performance of commodities has spurred interest in the various sources of returns to commodity investment. The underlying sources of return include the potential return due to backwardation. The extent of backwardation existing in various commodities depends both on the actual commodity examined and the changing characteristics of that particular commodity market. In this paper, we examine the role of backwardation in the performance of passive long positions in soybeans, corn, and wheat futures over the period, 1950 to 2004. We find that over this period, backwardation has been highly predictive of the return of a passive long futures position when measured over long investment horizons. A revisited version of this paper was published in the Winter 2006 issue of the Journal of Alternative Investments.
Author(s):
Barry Feldman, Hilary Till
Summary:
The recent performance of commodities has spurred interest in the various sources of returns to commodity investment. The underlying sources of return include the potential return due to backwardation. The extent of backwardation existing in various commodities depends both on the actual commodity examined and the changing characteristics of that particular commodity market. In this paper, we examine the role of backwardation in the performance of passive long positions in soybeans, corn, and wheat futures over the period, 1950 to 2004. We find that over this period, backwardation has been highly predictive of the return of a passive long futures position when measured over long investment horizons. A revisited version of this paper was published in the Winter 2006 issue of the Journal of Alternative Investments.
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Register/Log in| Type : | Working paper |
|---|---|
| Date : | 11/06/2006 |
| Keywords : |
Commodities |
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