An Index of Commodity Futures Returns Since 1871

15.May 2026

Commodity markets are back in investors’ focus. After years in which equities and growth assets dominated portfolios, the recent rise in geopolitical tensions, inflation uncertainty, supply-chain fragmentation, and renewed resource nationalism has reminded allocators that commodities remain a critical macro asset class. That is why a newly released research paper, An Index of Commodity Futures Returns Since 1871, is particularly timely. Using a hand-collected database covering more than 150 years of U.S. commodity futures history, the authors provide one of the most comprehensive long-term perspectives yet on commodity investing — showing not only that diversified commodity futures historically delivered equity-like risk premia, but also that their return drivers were meaningfully different from stocks, offering valuable diversification across economic regimes.

The study’s core empirical findings rest on three pillars. First, commodity futures has historically generated an average annual risk premium of 5.4% over the risk-free rate and a real return premium exceeding 6% per annum above U.S. inflation, and have outperformed equities in approximately 43% of calendar years and in two out of every five decades. This is underscoring their role as a return stream with distinct drivers that are uncorrelated to traditional equity risk factors. Second, the authors demonstrate that futures returns systematically exceed spot price returns on an interest-adjusted basis, providing robust, century-scale validation of a persistent commodity risk premium beyond mere spot appreciation. Third, by explicitly correcting for survivorship bias—a critical methodological advance—the index avoids the upward distortion common in backtested commodity strategies, yielding more reliable estimates of long-term expected returns.

Regarding the paper’s key visuals: Figure 2 plots the cumulative total returns of the commodity futures index against U.S. equities and cumulative inflation on a logarithmic scale, vividly illustrating the compound growth advantage of commodities over the very long run while highlighting periods of divergence during inflationary regimes. Figure 4 decomposes futures returns into spot price changes and the interest-adjusted basis, showing that the excess of futures over spot returns is not episodic but persistent across market cycles—consistent with a structural risk premium earned by bearing commodity price risk. Table 1, Panel A summarizes the core descriptive statistics for the index, including annualized mean excess returns, volatility, Sharpe ratio, and correlation metrics with equities and bonds; the reported 5.4% annual risk premium with moderate volatility supports the case for commodities as a return-enhancing, diversifying allocation.

For practitioners, this research provides a foundational benchmark for evaluating modern commodity strategies and reinforces the economic rationale for allocating to commodity futures within a strategic, long-term portfolio framework.

Authors: Rajkumar Janardanan, Xiao Qiao, and K. Geert Rouwenhorst

Title: An Index of Commodity Futures Returns Since 1871

Link: https://ssrn.com/abstract=6276738

Abstract:

This paper documents the returns to a broadly diversified index of commodity futures over more than 150 years of U.S. market history, that accounts for survivorship bias. We find that commodity futures have earned an average annual risk premium of 5.4% over the risk-free rate and a premium over US inflation of more than 6% per annum. Commodity futures have outperformed equities in roughly 43% of years and in two out of every five decades, suggesting distinct return drivers and meaningful diversification benefits. Futures returns have exceeded spot price returns on an interest-adjusted basis, consistent with the presence of a risk premium beyond spot price appreciation.

As always, we present several interesting figures and tables:

Notable quotations from the academic research paper:

“[…] documents the returns to a broadly diversified index of commodity futures, covering
more than 150 years of economic, financial, and institutional development. The analysis is based
on a uniquely constructed dataset that draws from exchange yearbooks when available and relies
extensively on newspaper archives to fill gaps in coverage. By including both active and obsolete
contracts, the resulting index reflects the evolving structure of futures markets and captures the
performance of a broad array of commodities, many of which are no longer traded today.²

The main findings are that over the past 155 years:

Commodity futures have earned a risk premium over the risk-free rate of 5.5%.
Commodity futures have outperformed U.S. stocks in two out of every five years.
The return to commodity futures has exceeded an index of U.S. inflation by more than
6% per annum.

Finally, we highlight the distinction between futures and spot returns through a decomposition of futures excess returns into spot returns and the roll yield.

We quantitatively summarize our results in Table 1, which provides average returns, volatility, and Sharpe ratios of collateralized commodity futures, stocks, Treasury bills, and inflation over the 1871-2025 period. The top panel shows that the equally-weighted commodity futures index has earned a risk premium of 5.5%, with annualized volatility of 14.3%, and a Sharpe ratio of 0.38. For comparison, the stock index has a risk premium of 6.6% and a volatility of 16.2%, which results in a Sharpe ratio of 0.41. The commodity spot index has the same volatility as the commodity futures index, but a markedly lower Sharpe ratio (0.22). The risk-adjusted returns are similar for commodity futures and stocks, and exceed the risk-adjusted performance of the commodity spot index.

Long-term returns provide critical input to inform investors about the properties of an asset class, especially when the underlying asset class constituents are volatile. This chapter presents a 155- year history of commodity futures markets. Leveraging a unique hand-collected dataset, we present annual returns and cumulative returns to an index of commodity futures, and compare its performance to the aggregate stock market, inflation, and spot returns. Like stocks, commodity futures have a positive risk premium. Returns to commodity futures deviate from stocks in ways that provide periodic outperformance, likely due to different fundamental drivers of returns. While volatile over shorter investment horizons, the index performance has shown consistent performance over long horizons – a critical requirement for any asset class.”

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