Commodity Investing: From Theory to Practice · Dr MAI Huu MinhChapter 13 of 22 · Module 4: Theory
CHAPTER 13
Where Do Commodity Returns Come From?
Spot return, roll return and collateral return
Opening question
“If commodities produce no cash flow, why should a long-term investor earn anything?”
In this chapter
- The three sources of return of a futures investment: spot, roll and collateral
- Why the same rise in the spot price can produce very different fund returns
- Total return and excess return indexes, with a worked example
- Keynes's insurance theory, hedging pressure and the theory of storage
- What long-run studies found — and how much depends on the period
- The diversification return from rebalancing, with a worked example
- Realistic expectations for long-term investors
- Returns measured in Vietnamese dong
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This chapter is in the full book
Chapter 1 is free to read online. The full text of chapter 13 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Commodity Investing: From Theory to Practice (Volume 2, NXW Investment Library).
Read Chapter 1 freeGet the full book — contact@nxw.vnSections of this chapter
13.1 A puzzle: an asset with no cash flows
13.2 Three sources of return
13.3 Spot return
13.4 Roll return and the shape of the curve
13.5 Collateral return
13.6 Hedging pressure and the risk premium
13.7 What the evidence says
13.8 The diversification return
13.9 Realistic expectations
13.10 Returns in Vietnamese dong