Financialization and the returns to commodity investments

Scott Main, Scott H. Irwin, Dwight R. Sanders, Aaron Smith

Research output: Contribution to journalArticlepeer-review


Commodity futures investment grew rapidly after their popularity exploded—along with commodity prices—in the mid-2000s. Numerous individuals and institutions embraced alternative investments for their purported diversification benefits and equity-like returns. We investigate whether the “financialization” of commodity futures markets reduced the risk premiums available to long-only investors in commodities. While energy futures markets generally exhibit a decline in risk premiums after 2004, premiums in all but one non-energy futures market actually increased over the same time period. Overall, the average unconditional return to individual commodity futures markets is approximately equal to zero before and after financialization.

Original languageEnglish (US)
Pages (from-to)22-28
Number of pages7
JournalJournal of Commodity Markets
StatePublished - Jun 2018


  • Commodity
  • Financialization
  • Futures prices
  • Index fund
  • Investments
  • Risk premium
  • Storable

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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