Are Commodities Futures Too Risky for Your Portfolio?
"are commodities really that risky? A shortage of data has left that question unanswered. Until now. Using the most comprehensive data on commodities futures returns ever assembled....Gorton and ...Rouwenhorst have reached a surprising conclusion: Commodities offer the same returns as investors are accustomed to receiving with stocks...."The authors also report that while commodities have about the same risk as stocks, commodities tend to be negatively correlated with the both stocks and bonds and therefore make an ideal investment for diversification purposes.
And besides, who hasn't wanted to say they trade Orange Juice like Eddie Murphy!
Working paper cite:
Rouwenhorst, K. Geert and Gorton, Gary B., "Facts and Fantasies about Commodity Futures" (February 28, 2005). Yale ICF Working Paper No. 04-20. Available at SSRN: http://ssrn.com/abstract=560042
What a day! Two great articles. No wonder finance is so fun! Every day there are new articles to read! It's like a candy store without the calories!