Stats › Tradeable patterns › Roll yield
Roll return explained 91% of commodity futures returns
| Commodity | Excess return | Spot return | Roll return |
|---|---|---|---|
| S&P GSCI | +4.49% | +1.89% | +2.59% |
| Heating oil | +5.53% | +0.93% | +4.60% |
| Copper | +6.17% | +3.28% | +2.89% |
| Soybeans | -0.35% | +1.80% | -2.15% |
| Wheat | -5.39% | +0.57% | -5.96% |
| Corn | -5.63% | +1.57% | -7.19% |
| Gold | -5.68% | -0.79% | -4.90% |
| Silver | -8.09% | -2.54% | -5.55% |
Source: Erb and Harvey, The Tactical and Strategic Value of Commodity Futures, NBER working paper 11222, sample December 1982 to May 2004. Spot plus roll reconciles to excess return within a basis point or two on every row, which is the check I ran before publishing it. Note gold: a negative roll return of 4.90% a year on a metal whose price rose over most of that period.
A commodity future expires, so keeping the exposure means selling the near contract and buying a dearer or cheaper one. Across twelve commodities over twenty two years, that roll explained 91 per cent of the difference in returns. The price of the commodity explained little.
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