Stats › Currencies and commodities › Roll return
Roll return explains 91% of the commodity cross-section, and tells you nothing about the future
Annualised excess returns in percent, December 1982 to May 2004. The three positive names are the ones whose term structure was on average backwardated over the period and the five negative ones were on average in contango. The ordering is almost entirely explained by roll return, not by what happened to spot prices.
Regressing twelve commodities' average excess returns on their average roll returns gives a slope of 1.20 and an adjusted R squared of 91.57%. The authors then state plainly that this says nothing about what future roll returns will be.
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