The historical performance of commodity investments can provide useful information for forecasting future returns, volatility, and correlations with other asset classes. However, with the growth of the commodity index-based investment, many commodity markets have been transformed from purely commercial markets into markets with a significant investor presence, leading to concerns that the historical track record may be of questionable value in projecting future returns. In particular, much of the case for commodity investment is derived from the low levels of historical correlation between the returns on commodity futures and stock or bond investments. If the correlation is rising over time, commodities may be less diversifying than previously estimated.

Buyuksahin, Haigh, and Robe (2010) addressed this concern. They used dynamic correlation and recursive co-integration techniques to determine whether the relationship between commodity index returns and equity index returns had changed over recent years. They found that the extent of co-movement between the two asset classes had not changed significantly over the period of the study (1991 to 2008). Furthermore, they found that the low correlation actually became negative in the last five years of the study. Even when they restricted their analysis to periods of extreme returns, they found no increase in co-movement between commodities and equities. Chong and Miffre (2008) also ...

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