Chapter 4 CONCLUSIONS AND AVENUES FOR FUTURE...
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65 Chapter 4 CONCLUSIONS AND AVENUES FOR FUTURE RESEARCH This chapter provides conclusions stemming from the work, the implications of the study, limitations of the study, and avenues for future research work. Commodities are considered as a separate asset class by investors. Their negative relationship with bonds and stocks makes them a valuable addition to the conventional portfolio (that consists of stocks and bonds). Investment in commodity futures (one of the many instruments that allows investors’ to have positions in commodities) by institutional investors has surged in recent years and all the major commodity futures exchanges in the world have witnessed a large increase in trading volumes. Indian commodity futures market reopened (during 2003) when the Government of India lifted the ban on commodity futures trading (imposed during 1960’s and 1970’s owing to the price manipulation by speculators). The Indian commodity futures markets has grown considerably since 2004. The commodity futures markets is a zero-sum game market where one loses and the other counterparty gains the equal amount. However, recent research has shown that investment strategies based on momentum and term structure work well in the commodity futures markets. Looking at the growth in the Indian commodity futures markets it is worth examining the diversification benefits associated with these instruments. The first part of the research involves studying the diversification benefits of adding commodities to a conventional portfolio of stocks and bonds. Results show that momentum and term structure strategies are very well applicable to commodity futures in India. Commodities when incorporated (using momentum and term structure
Transcript of Chapter 4 CONCLUSIONS AND AVENUES FOR FUTURE...
65
Chapter 4
CONCLUSIONS AND AVENUES FOR FUTURE RESEARCH
This chapter provides conclusions stemming from the work, the implications of the study,
limitations of the study, and avenues for future research work.
Commodities are considered as a separate asset class by investors. Their negative
relationship with bonds and stocks makes them a valuable addition to the conventional
portfolio (that consists of stocks and bonds). Investment in commodity futures (one of the
many instruments that allows investors’ to have positions in commodities) by
institutional investors has surged in recent years and all the major commodity futures
exchanges in the world have witnessed a large increase in trading volumes.
Indian commodity futures market reopened (during 2003) when the Government of India
lifted the ban on commodity futures trading (imposed during 1960’s and 1970’s owing to
the price manipulation by speculators). The Indian commodity futures markets has grown
considerably since 2004. The commodity futures markets is a zero-sum game market
where one loses and the other counterparty gains the equal amount. However, recent
research has shown that investment strategies based on momentum and term structure
work well in the commodity futures markets. Looking at the growth in the Indian
commodity futures markets it is worth examining the diversification benefits associated
with these instruments. The first part of the research involves studying the diversification
benefits of adding commodities to a conventional portfolio of stocks and bonds. Results
show that momentum and term structure strategies are very well applicable to commodity
futures in India. Commodities when incorporated (using momentum and term structure
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strategies) to the conventional portfolio results in a higher Sharpe ratio for the majority of
the years under study. This indicates a superior portfolio performance by incorporating
commodities. Addition of commodities to the conventional portfolio does not increase the
overall portfolio returns in majority of the years studied. Therefore, the diversification
benefits that appeared in the form of high Sharpe ratios must have resulted from the
reduction in overall risk of the portfolio.
Literature suggests that commodity futures have a positive relationship with inflation, but
stocks and bonds do not perform well during high inflation. Considering that trading in
commodity futures is not responsible for the increase in prices of commodities and
commodity futures (stocks and bonds) are positively (negatively) linked to inflation, the
second research question attempts at understanding whether commodity futures act as an
inflation hedge to the conventional portfolio during high inflationary years. Results show
that incorporation of inflation tracking portfolio with the conventional portfolio results in
high Sharpe ratios during high inflationary years. Thus, commodity futures act as an
inflation hedge when combined with conventional portfolio during high inflationary
years.
4.1 Implication of the study
In India, a handful of studies report about the challenges faced by Indian commodity
futures markets, market efficiency, and recommendations for proper functioning of
commodity futures markets. Two studies (GOI and RBI) report the relationship between
trading of agricultural commodity futures and their impact on price of the commodity.
Literature still lacks the studies related to the diversification benefits and inflation
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hedging properties of Indian commodity futures. The present research work fills this gap
and reports that commodity futures do provide diversification benefits and do possess
inflation hedging properties. In the present scenario, where RBI is likely to give
permission to banks and FIIs to invest in Indian commodity futures markets and investors
in India are facing high inflation for last few years, results of both the studies are relevant
and important to investors.
4.2 Suggestions for future research work
The first part of the present research work incorporates most liquid commodities (based
on volume) and a yearly analysis of single sort strategies. Single sort strategies use only
one type of signal to formulate investment strategies (eg. past performance of commodity
futures was used to formulate momentum strategies, term structure signals were used to
formulate term structure strategies). Diversification benefits were studied where the
ranking and holding period of commodity futures in the conventional portfolio was
assumed one year. It is assumed that investor uses only one year past data, formulate
investment strategies for next one year and hold the portfolio for one year. Commodity
futures are likely to provide better diversification benefits with dual and triple sort
strategies (strategies where more than one signal is used to formulate investment
strategies such as combining momentum and term structure signals in a single strategy).
As a large number of investment strategies can be formulated using different ranking and
holding periods, an extensive study using dual and triple sort strategies with a large
number of ranking and holding periods can provide much better explanation about the
diversification potential of commodities. Such extensive analysis may also reveal the
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investment strategies and ranking and holding periods, which provides best
diversification benefits.
The second part of the research work shows that ex-ante inflation tracking portfolios of
commodity futures when incorporated with conventional portfolio results in high Sharpe
ratios during high inflationary years. The ex-ante results indicate the inflation hedging
potential of commodity futures, but investors will be interested in knowing specific
commodities to invest that can provide a hedge against inflation. For such analysis, tools
are needed to forecast stocks, bonds and commodity futures along with inflation. If
forecasting of inflation and other asset classes can be done accurately, it would be
possible to form portfolios that can effectively hedge inflation.
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Appendices
Appendix A1: Volumes of contracts traded on MCX from 2003-2012.
Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 TOTAL
AGRICULTURAL PRODUCTS
ALMOND
62196 5420 230 146 67992
ARECANUT
12891 4032 8504 87
25514
BARLEY
57793 1001
58794
BASMATI RICE
329 12174 27098 58
39659
CARDAMOM
572157 506934 87908 66314 635749 1074014 2731827 5674903
CASHEW KERNEL
112 2962 9282 2
12358
CASTOR SEED
40819 20330 48314 181 2346
111990
CASTOROIL
110 3607 32982 2 30
36731
CASTORSEED 1250 6493 15267 14271
37281
CHANA
13812 333272 515777 224507 226222 354529 66730 826 11 1735686
COCONUT CAKE
12149
12149
COCONUT OIL
38301 2
38303
COFFEE
183619 87
183706
CORIANDER
16290 717 4 875
17886
COTTON
422 5489 5136 2722
10118
23887
COTTON YARN
306
306
COTTON(29mm)
46860 407465 454325
COTTONSEED
13628 42948 12
56588
COTTONSEED OIL CAKE
15854 987793 443505 362882 151859 3741 684 5 83515 2049838
CRUDE PALM OIL
37 8682 3658
134570 376156 425377 933364 1934839 3816683
GROUNDNUT OIL (EXPELLER)
73 3676 39775
43524
GUARGUM
255 18459 15691 1020 694 210
36329
GUARSEED
34708 1342393 451913 371128 3309 247382 24250 1019 5 2476107
GUR
197 6494 60120 41251
108062
70
JEERA
64243 140941 29026 628
234838
JUTE
67156 103182 124123
294461
KAPAS
17158 114481 381573 211287 71623 65447 87596 194138 303323 1446626
MAIZE
788 1843 6188 103 45 99 19216 1355 25 29662
MASUR
183185 186777 6
369968
MENTHAOIL
873693 2428230 816749 425023 506042 1571093 1568917 2289139 10478886
MUSTARD SEED
678 3826 17073
21577
MUSTARDOIL
9 31363 176795 4
208171
MUSTRDSEED
2296
4
2300
PEPPER
6406 102708 44317 192481 2430 41803
390145
POTATO
450275 610771 60165 108434 496329 577876 323034 2626884
RBD PALMOLEIN
59 16945 3759
20763
RED CHILLI
2290 4730 27082 18614
52716
REFINED SOY OIL
169959 851671 887733 969429 356007 367879 126292 10712 48 3739730
REFINED SUNFLOWER OIL
9518
9518
RICE
32 9243 39550
48825
RICEBRAN DOC
10
10
RICEBRAN OIL
1036
1036
RUBBER 2 10574 181010 53551 56036 1368 201 6
302748
SARBATI RICE
11444 20537
31981
SESAMESEED
13477 14797
28274
SOYABEAN
5452 28317 51644 17946 302 37201 763 7
141632
SOYMEAL
331 1702
2033
SUGAR
6668 117111 94214 30661 2496 3930 243556 17567 516203
TUR
1423 67784 245508 120
314835
TURMERIC
127 3215
89202 138162
2
230708
URAD
14544 205020 541814 17677
779055
WHEAT
3097 24689 92548 337
86862 4676 192 2 212403
YELLOWPEAS
792 24087 28445
18
53342
TOTAL 1252 305790 5620984 8286804 4937643 1819250 2464405 3525910 4654947 8090946
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ENERGY PRODUCTS
ATF
7151 1
142
7294
BRENT CRUDE OIL
43167 83956 150 42
2280 2359 130512 262466
CRUDE OIL
5157811 4466538 13938813 20507001 41092821 41537053 54753658 57790229 239243924
ELECTRICITY
16
16
FURNACEOIL
744 59154 200
60098
GASOLINE
54942 842 20 20 55824
HDPE
502 49733
50235
HEATING OIL
51827 599 25
52451
MIDDLE EAST CRUDE OIL
21168
21168
PVC
1513 8
1521
THERMAL COAL
166 2 22 10 200
PPTQ
35427 44146
79573
NATURALGAS
1953756 1732759 747506 11124491 11176937 9882119 27886670 64504238
TOTAL 0 0 5237651 6679964 15671930 21261700 52324264 52717713 64638345 85807441
ENVIRONMENTAL PRODUCTS
CFI
3414
4 3418
CER
35197 7448
42645
TOTAL 0 0 0 0 0 38611 7448 0 0 4
FERROUS METAL PRODUCTS
STEEL
29567 29567
IRONORE
3574 2 3576
TOTAL 0 0 0 0 0 0 0 0 3574 29569
NON-PRECIOUS METAL PRODUCTS
COPPER
4151 186921 5293964 15375506 14277796 29602264 31341022 34454484 50735051 181271159
LEAD
8541 1091816 1654413 3369969 8545836 11654393 17253283 43578251
NICKEL
740 13939 30982 2169749 2022276 9792850 17929207 15141165 24470097 71571005
SPONGEIRON
184 18082
18266
STEEL LONG
1728 20818 48913 405 188 15769 1811
89632
STEELFLAT
632 6450 13915 36 2 1
21036
72
TIN
10 6622 11005 31082 66566 6147 1062 32 59 122585
ZINC
562647 3551909 3166793 4033350 11927214 14901936 14215371 52359220
ALUMINIUM
1576 194970 307495 111804 610478 1866181 3230132 7198805 13521441
TOTAL 0 7261 236510 6183019 22527998 21299838 47430828 71612333 79382142 113872666
PRECIOUS METAL PRODUCTS
PLATINUM
3790 12911 221 210 21 17153
SILVER 122 1583732 6481449 12496828 15441649 23886120 28510224 37766114 118104250 104993118 349263606
GOLD 3802 724236 2773381 11988919 10366705 26001228 30423657 31581365 79354310 75861929 269079532
TOTAL 3924 2307968 9254830 24485747 25808354 49891138 58946792 69347700 197458770 180855068
Appendix A2: Volumes of contracts traded on NCDEX from 2003-2012.
Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total
AGRICULTURAL PRODUCTS
28.5 mm COTTON
163 17212 2
17377
ALMOND
7
7
ARABICA COFFEE NEW
1008 18
1026
BARLEY
11859 136006 23667 39779 91559 66514 367811 737195
CASHEW
2315 81
2396
CASTOR SEED
7042 36852 193489 1751813 1989196
CHANA
664258 8515488 12202639 4454973 1459773 3594384 4486492 7717917 5102383 48198307
CHILLI SANAM
274844
274844
CHILLI
23921 1303490 846312 118043 55621 127674 358516 300710 3134287
COFFEE ROBUSTA CHERRY AB
612 28
640
COMMON PARBOILED RICE
2728
2728
COMMON RAW RICE
2973
2973
CORIANDER
1596 1996 18989 339150 732521 1094252
COTTON SEED OILCAKE
372764 1814792 2234265 4412271 8834092
COTTON SEED OIL CAKE 2
959421 855372 1181655 1201884 602145
4800477
73
COTTON SEED OIL CAKE 3
829 5369 146
6344
CRUDE PALM OIL 7072 24437 50489
400
4432 28
86858
GRADE A PARBOILED RICE
5272
5272
GRADE A RAW RICE
4730
4730
GROUND NUT IN SHELL
1906
1906
GROUND NUT IN SHELL BIKANER
76
76
GROUND NUT OIL
5125 4
5129
GUAR GUM
437844 1509912 612325 171885 132508 854114 1332904 1706691 83267 6841450
GUAR SEED
4714095 18630797 14095704 6804414 6021736 9029772 10938943 8941634 367501 79544596
GUR
23657 171303 352334 402572 186219 235610 1371695
INDIAN 28.5 MM COTTON
4
4
INDIAN 31 MM COTTON
136 80
216
INDIAN PARBOILED RICE
1308
1308
INDIAN RAW RICE
1428
1428
JEERA
435558 1250460 3495505 1141825 727641 1307118 1304589 1525009 11187705
JUTE BAGS
1469 7108 1
8578
KACCHI GHANI MUSTARD OIL
502
502
KAPAS
158948 441996 334434 259492 561660 934198 1720510 4411238
LONG STAPLE COTTON
126 1414
1540
MAIZE
29959 434525 296269 275433 51825 96592
1184603
MAIZE FEED INDUSTRIAL GRADE
33566 188749 651489 873804
MASOOR GRAIN BOLD
4939 19281 1836
26056
MEDIUM STAPLE COTTON
4221 13466 372 10 1
18070
MENTHA OIL
13
13
MENTHA OIL 2
34124 430671 166169 3495 4
634463
MULBERRY GREEN COCOONS
8
8
MULBERRY RAW SILK
3
3
MUSTARD SEED
26031 3460959 6060045 9547035
MUSTARD SEED 2 1172 152281 665996 315298 2173748 3819308 2841172 3173249 63373
13205597
MUSTARD SEED OIL 789 6232 53409
60430
74
PEPPER
147372 675050 4535589 8107601 2633393 1593433 3687783 2586968 1137513 25104702
POTATO
533 49810 448474 416021 115457 1030295
POTATO 2
32637 198526 49022
280185
PUSA BASMATI RICE
1570
1570
R M OIL
35 30
65
RAPESEED MUSTARD OIL CAKE
3855 23
3878
RAW JUTE
68884 204852 3809 2916 1224 485
282170
RBS PALM OLEIN 7098 23498 19647
50243
RBD PALM OLEIN 2
14666 14666
REF SOY OIL 2177 579311 1036404 890589 1536211 850494 2542187 3786721 5378745 8164038 24766877
ROBUSTA COFFEE NEW
52 6
58
RUBBER RSS4
15805 16041 80 5
31931
RUBBER NEW
6 31 11
22 791 861
SESAME SEED
2117 1554 34
3705
SHANKAR KAPAS
1523 589
1398 3510
SOYBEAN 1819 352665 1116230 1626843 2648853 3582865 4051421 4739840 4054709 6829433 29004678
SOY MEAL
6745 26390 6851
52 40038
SUGAR M GRADE
103312 1434424 790225 12419 589944 641472 3571796
SUGAR M GRADE 2
84694 1097863 1001037 1302817 17898
3504309
SUGAR S
2083 3388
1 2
5474
SUGAR S 2
591 847 540
1978
SUGAR S 3
2121 13253 30
15404
TURMERIC
11906 154809 467131 847071 1183898 1327206 544620 450173 1058823 6045637
V 797 KAPAS
68919 198553
267472
WHEAT
209760 624145
833905
WHEAT NEW
504232 3063159 149003 0 148492 291993 244603 352096 4753578
YELLOW PEAS
40 82
122
YELLOW PEAS 2
2193 13127 495
15815
YELLOW SOYBEAN MEAL
930
2
932
TOTAL 20127 7505696 36796289 43554063 35096167 24463365 29310657 37965787 41417478 41626679
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ENERGY PRODUCTS
BRENT CRUDE OIL
125868 135873 151552 1830
274 10 415407
FURNACE OIL
6155 4219 10 73
10457
GASOLINE
2
2
LIGHT SWEET CRUDE OIL
27310 284616 402124 2277068 4223370 829606 8044094
NATURAL GAS
18 2 3684
3704
THERMAL COAL
24
24
THERMAL COAL 2
5
5
TOTAL
132023 140092 178872 286543 402142 2277077 4227328 829616
NON- PRECIOUS METALS
ALUMINIUM
6
6
ALUMINIUM INGOT
2736
2736
COPPER CATHODE
2899 164628 587522 178525 933574
ELECTROLYTIC COPPER CATHODE
14974 24841 753
40568
ELECTROLYTIC COPPER CATHODE 2
136 158414 75059 126705
360314
NICKEL
7 1 5 5956
5969
NICKEL CATHODE
28 9
37
ZINC
52 1 896
949
ZINC INGOT
348 2
350
TOTAL 0 0 14974 28089 159178 75118 129606 165535 593478 178525
PRECIOUS METALS
GOLD
12245 232
12477
GOLD 2
236 1228
1464
GOLD 3
47573 335387 2865 385825
GOLD 100 GMS
28711 11017 346
40074
GOLD 100 GM 2
19708 124640 129117 20738
294203
GOLD INTERNATIONAL
642
642
GOLD KG
3913 271267 1328644 742566 233401 26373
2606164
PLATINUM
6 2
8
SILVER
9421 103160 4669 117250
76
SILVER 2 1395 3663915 6207619 1909068 662518 111622
12556137
SILVER 3
32 82
114
SILVER 5 KG
17541 136124 63556 7881
225102
SILVER 5 KG AHMEDABAD
263 30
54 347
SILVER INTERNATIONAL
727
727
SILVER PUR AHMEDABAD
51841 26020 54
77915
TOTAL 1395 3667828 6478886 3274961 1665848 589805 123547 68329 440262 7588
ENVIRONMENTAL PRODUCTS
CARBON CREDITS
14064 10
14074
TOTAL
14064 10
FERROUS METAL
MILD STEEL INGOTS
244221 300659 172038 302555
1019473
SPONGE IRON
6770
6770
STEEL LONG
12492 209583 773716 581114 130521 1707426
TOTAL
244221 307429 172038 315047 209583 773716 581114 130521
INDUSTRIAL CHEMICALS
LINEAR LOW DENSITY POLYETHYLENE
6 4
10
POLY VINYL CHLORIDE
230 230
POLY VINYL CHLORIDE 2
1453
1453
TOTAL
1459 4
230
77
Appendix B1: List of top 20 contracts traded at MCX.
2003 2004 2005 2006 2007
GOLD SILVER SILVER SILVER SILVER
CASTOR SEED GOLD CRUDE OIL GOLD COPPER
SILVER REFINED SOY OIL GOLD COPPER CRUDE OIL
RUBBER GUAR SEED GUAR SEED CRUDE OIL GOLD
KAPAS COTTON SEED OIL CAKE MENTHA OIL ZINC
COTTON SEED OIL CAKE MENTHA OIL NATURAL GAS NICKEL
URAD REFINED SOY OIL REFINED SOY OIL NATURAL GAS
CHANA CHANA CARDAMOM LEAD
RUBBER URAD ZINC REFINED SOY OIL
CASTOR SEED COPPER URAD MENTHA OIL
PEPPER MASUR CHANA POTATO
SOYABEAN RUBBER GUAR SEED CARDAMOM
COPPER KAPAS POTATO GUAR SEED
WHEAT PEPPER COTTON SEED OIL CAKE COTTON SEED OIL CAKE
RED CHILLI TUR KAPAS ALUMINIUM
STEEL LONG JEERA TUR CHANA
TUR BRENT CRUDE OIL ALUMINIUM KAPAS
YELLOW PEAS CASTOR SEED MASUR PEPPER
MAIZE PPTQ MUSTARD OIL COFFEE
2008 2009 2010 2011 2012
GOLD CRUDE OIL CRUDE OIL SILVER SILVER
SILVER GOLD SILVER GOLD GOLD
CRUDE OIL COPPER GOLD CRUDE OIL CRUDE OIL
COPPER SILVER COPPER COPPER COPPER
ZINC NATURAL GAS NICKEL NICKEL NATURAL GAS
NICKEL NICKEL ZINC ZINC NICKEL
LEAD ZINC NATURAL GAS LEAD LEAD
NATURAL GAS LEAD LEAD NATURAL GAS ZINC
MENTHA OIL ALUMINIUM ALUMINIUM ALUMINIUM ALUMINIUM
REFINED SOY OIL MENTHA OIL MENTHA OIL MENTHA OIL CARDAMOM
CHANA CRUDE PALM OIL CARDAMOM CARDAMOM MENTHA OIL
COTTON SEED OIL CAKE REFINED SOY OIL POTATO CRUDE PALM OIL CRUDE PALM OIL
TURMERIC CHANA CRUDE PALM OIL POTATO COTTON (29mm)
78
CRUDE PALM OIL GUAR SEED REFINED SOY OIL SUGAR POTATO
ALUMINIUM JUTE KAPAS KAPAS KAPAS
JUTE POTATO CHANA COTTON (29mm) BRENT CRUDE OIL
CARDAMOM WHEAT BARLEY REFINED SOY OIL COTTON SEED OIL CAKE
KAPAS CARDAMOM GUAR SEED IRON ORE STEEL
TIN KAPAS MAIZE BRENT CRUDE OIL SUGAR
POTATO ALMOND ALMOND MAIZE ALMOND
Appendix B2: List of top 20 contracts traded at NCDEX.
2003 2004 2005 2006 2007
RBS PALM OLEIN GUAR SEED GUAR SEED GUAR SEED PEPPER
CRUDE PALM OIL SILVER 2 CHANA CHANA GUAR SEED
REF SOY OIL CHANA SILVER 2 PEPPER CHANA
SOYBEAN REF SOY OIL GUAR GUM WHEAT NEW JEERA
SILVER 2 GUAR GUM SOYBEAN SILVER 2 SOYBEAN
MUSTARD SEED 2 SOYBEAN SUGAR M GRADE 2 SOYBEAN MUSTARD SEED 2
MUSTARD SEED OIL WHEAT REF SOY OIL GOLD KG REF SOY OIL
MUSTARD SEED 2 COTTON SEED OIL CAKE 2 CHILLI SUGAR M GRADE 2
PEPPER PEPPER JEERA COTTON SEED OIL CAKE 2
SUGAR M GRADE 2 MUSTARD SEED 2 SUGAR M GRADE 2 TURMERIC
RAW JUTE WHEAT REF SOY OIL CHILLI
CRUDE PALM OIL WHEAT NEW COTTON SEED OIL CAKE 2 GOLD KG
RBS PALM OLEIN JEERA GUAR GUM SILVER 2
RUBBER RSS4 CHILLI SANAM TURMERIC KAPAS
TURMERIC GOLD KG MAIZE MAIZE
SOY MEAL MILD STEEL INGOTS MENTHA OIL 2 POTATO 2
MUSTARD SEED OIL RAW JUTE MUSTARD SEED 2 MILD STEEL INGOTS
GOLD KG TURMERIC MILD STEEL INGOTS GUAR GUM
YELLOW PEAS 2 BRENT CRUDE OIL V 797 KAPAS MENTHA OIL 2
SUGAR S 3 V 797 KAPAS KAPAS ELECTROLYTIC COPPER CATHODE 2
79
2008 2009 2010 2011 2012
GUAR SEED GUAR SEED GUAR SEED GUAR SEED REF SOY OIL
MUSTARD SEED 2 SOYBEAN SOYBEAN CHANA SOYBEAN
SOYBEAN CHANA CHANA REF SOY OIL MUSTARD SEED
PEPPER MUSTARD SEED 2 REF SOY OIL LIGHT SWEET CRUDE OIL CHANA
CHANA REF SOY OIL PEPPER SOYBEAN COTTON SEED OILCAKE
SUGAR M GRADE PEPPER MUSTARD SEED 2 MUSTARD SEED CASTOR SEED
COTTON SEED OIL CAKE 2 TURMERIC LIGHT SWEET CRUDE OIL PEPPER KAPAS
TURMERIC GUAR GUM COTTON SEED OILCAKE COTTON SEED OILCAKE JEERA
JEERA SUGAR M GRADE GUAR GUM GUAR GUM PEPPER
REF SOY OIL JEERA JEERA JEERA TURMERIC
KAPAS COTTON SEED OIL CAKE 2 STEEL LONG KAPAS LIGHT SWEET CRUDE OIL
MILD STEEL INGOTS LIGHT SWEET CRUDE OIL KAPAS SUGAR M GRADE CORIANDER
LIGHT SWEET CRUDE OIL COTTON SEED OILCAKE TURMERIC COPPER CATHODE MAIZE FEED INDUSTRIAL GRADE
MAIZE GUR POTATO STEEL LONG SUGAR M GRADE
GOLD KG KAPAS GUR TURMERIC BARLEY
GUR STEEL LONG WHEAT NEW POTATO GUAR SEED
GUAR GUM WHEAT NEW COPPER CATHODE CHILLI WHEAT NEW
GOLD 100 GM 2 ELECTROLYTIC COPPER CATHODE 2
CHILLI CORIANDER CHILLI
CHILLI CHILLI MAIZE GOLD 3 GUR
SILVER 2 MAIZE BARLEY WHEAT NEW COPPER CATHODE
Appendix B3: List of top commodities traded at MCX and NCDEX.
2004 2005 2006 2007 2008
GOLD GUAR SEED* GUAR SEED
* SILVER GOLD
REF SOY OIL* CHANA
* SILVER COPPER SILVER
RUBBER SILVER CHANA* CRUDE OIL CRUDE OIL
SILVER 2* CRUDE OIL GOLD GOLD COPPER
RBS PALM OLEIN* GOLD COPPER PEPPER
* GUAR SEED
*
SOYBEAN* GUAR GUM
* PEPPER
* GUAR SEED
* MUSTARD SEED 2
*
MUSTARD SEED OIL* SOYBEAN
* CRUDE OIL CHANA
* SOYBEAN
*
MUSTARD SEED 2* SUGAR M GRADE 2
* WHEAT NEW
* ZINC ZINC
REF SOY OIL
* MENTHA OIL JEERA
* PEPPER
*
PEPPER
* SILVER 2
* SOYBEAN
* NICKEL
MUSTARD SEED 2
* SOYBEAN
* MUSTARD SEED 2
* LEAD
80
JEERA
* CHILLI
* NICKEL SUGAR M GRADE
*
JEERA
* NATURAL GAS COTTON SEED OIL CAKE 2
*
SUGAR M GRADE 2
* REF SOY OIL
* TURMERIC
*
REF SOY OIL
* SUGAR M GRADE 2
* JEERA
*
COTTON SEED OIL CAKE 2
* COTTON SEED OIL CAKE 2
* NATURAL GAS
GUAR GUM
* TURMERIC
* MENTHA OIL
CARDAMOM CHILLI
* KAPAS
*
URAD MENTHA OIL LIGHT SWEET CRUDE OIL
*
TURMERIC
* POTATO MAIZE
*
2009 2010 2011 2012
CRUDE OIL CRUDE OIL SILVER SILVER
GOLD SILVER GOLD GOLD
COPPER GOLD CRUDE OIL CRUDE OIL
SILVER COPPER COPPER COPPER
NATURAL GAS NICKEL NICKEL NATURAL GAS
NICKEL ZINC ZINC NICKEL
GUAR SEED* NATURAL GAS LEAD LEAD
SOYBEAN* GUAR SEED
* NATURAL GAS ZINC
ZINC LEAD GUAR SEED* REF SOY OIL
*
CHANA* SOYBEAN
* CHANA
* ALUMINIUM
LEAD CHANA* REF SOY OIL
* SOYBEAN
*
MUSTARD SEED 2* REF SOY OIL
* LIGHT SWEET CRUDE OIL
* MUSTARD SEED
*
REF SOY OIL* PEPPER
* SOYBEAN
* CHANA
*
PEPPER* MUSTARD SEED 2
* MUSTARD SEED
* COTTON SEED OILCAKE
*
TURMERIC* LIGHT SWEET CRUDE OIL
* ALUMINIUM CARDAMOM
GUAR GUM* ALUMINIUM PEPPER
* MENTHA OIL
SUGAR M GRADE* COTTON SEED OILCAKE
* COTTON SEED OILCAKE
* CASTOR SEED
*
JEERA* MENTHA OIL GUAR GUM
* KAPAS
*
ALUMINIUM GUAR GUM* MENTHA OIL JEERA
*
COTTON SEED OIL CAKE 2* JEERA
* JEERA
* PEPPER
*
*traded at NCDEX
81
Appendix B4: List of top agricultural commodities traded at MCX and NCDEX.
2005 2006 2007 2008
GUAR SEED GUAR SEED PEPPER GUAR SEED
CHANA CHANA GUAR SEED MUSTARD SEED 2
GUAR GUM PEPPER CHANA SOYBEAN
SOYBEAN WHEAT NEW JEERA PEPPER
SUGAR M GRADE 2 MENTHAOIL# SOYBEAN SUGAR M GRADE
REF SOY OIL SOYBEAN MUSTARD SEED 2 COTTON SEED OIL CAKE 2
PEPPER CHILLI REF SOY OIL TURMERIC
MUSTARD SEED 2 JEERA SUGAR M GRADE 2 JEERA
JEERA SUGAR M GRADE 2 COTTON SEED OIL CAKE 2 MENTHAOIL#
URAD# REF SOY OIL TURMERIC KAPAS
RAW JUTE COTTON SEED OIL CAKE 2 CHILLI MAIZE
GUAR GUM MENTHAOIL# GUR
CARDAMOM# POTATO
# GUAR GUM
URAD# CARDAMOM
# CHILLI
TURMERIC KAPAS CARDAMOM#
MUSTARD SEED 2 MAIZE JUTE#
2009 2010 2011 2012
GUAR SEED GUAR SEED GUAR SEED REF SOY OIL
SOYBEAN SOYBEAN CHANA SOYBEAN
CHANA CHANA REF SOY OIL MUSTARD SEED
MUSTARD SEED 2 REF SOY OIL SOYBEAN CHANA
REF SOY OIL PEPPER MUSTARD SEED COTTON SEED OILCAKE
PEPPER MUSTARD SEED 2 PEPPER CARDAMOM#
TURMERIC COTTON SEED OILCAKE COTTON SEED OILCAKE MENTHAOIL#
GUAR GUM MENTHAOIL# GUAR GUM CASTOR SEED
SUGAR M GRADE GUAR GUM MENTHAOIL# KAPAS
JEERA JEERA JEERA JEERA
COTTON SEED OIL CAKE 2 CARDAMOM# CARDAMOM
# PEPPER
MENTHAOIL# KAPAS KAPAS TURMERIC
GUR TURMERIC SUGAR M GRADE CORIANDER
KAPAS POTATO# POTATO
# MAIZE FEED INDUSTRIAL GRADE
CARDAMOM# GUR TURMERIC SUGAR M GRADE
CHILLI WHEAT NEW CHILLI POTATO#
# traded at MCX
82
Appendix C: Computation of futures return, spot return and roll returns.
The input to the Markowitz optimization includes stock returns (monthly returns based on CNX Nifty Total Returns Index), bond
returns (monthly returns based on NSE Composite Bond Index) and futures returns (monthly returns of individual commodities or
equiweighted portfolio of commodities). The commodity futures exchange provides a number of tradable contracts for large number
of commodities. Availability of a large number of contracts at the same time provides a lot of information about future prices. The
information revealed from the futures curve may help to implement a large number of tradable strategies using deferred contracts.
Data for a sample sub-period is used in the table below to illustrate computation of futures return, spot return and roll return.
Futures prices
Futures contracts Jan Feb Mar Apr May Jun Jul First nearby Second nearby
Roll-over date
31-Dec 57.98 61.04 62.09 62.35 62.7 63 63.25 57.98 61.04
31-Jan 68.35 67.92 68.74 69.28 69.7 70.01 68.35 67.92
28-Feb 61.1 61.41 63.01 64.06 64.83 61.10 61.41
31-Mar 60.57 66.63 67.93 68.67 60.57 66.63
30-Apr 71.95 71.88 73.5 71.95 71.88
31-May 69.23 71.29 69.23 71.29
30-Jun 68.94 68.94
Futures return* Spot return* Roll return*
Jan 11.98% 9.39% 10.25% 10.49% 10.63% 10.69% 17.89% -5.91%
Feb -10.04% -10.66% -9.05% -8.09% -7.40% -10.61% 0.57%
Mar -1.37% 5.75% 6.04% 5.92% -0.87% -0.50%
Apr 7.98% 5.81% 7.03% 18.79% -10.80%
May -3.69% -3.01% -3.78% 0.09%
Jun -3.30% -0.42% -2.88%
*Assumed that investor takes a long position and offsets by taking short position
As a large number of futures contracts are available at the same time, an investor can take position in any of the futures contracts. For
instance, at the end of December, investor can take position in Feb, March, April, May, June, July futures contracts. Similarly, at the
end of January, investor can take positions in next available futures contracts. Investor can realize the futures returns for the period of
January in several ways: 1. Initially taking a long position in Feb contract (at end of December), hold it for a month and offset the
position. 2. Initially taking a long position in March (at end of December), hold it for a month and offset the position. 3. Initially
taking a long position in April (at end of December), hold it for a month and offset the position. 4. Initially taking a long position in
May (at end of December), hold it for a month and offset the position and so on. Similarly, investor can realize the futures returns for
83
the period of February in several ways: 1. Initially taking a long position in March contract (at end of January), hold it for a month and
offset the position. 2. Initially taking a long position in April contract (at end of January), hold it for a month and offset the position. 3.
Initially taking a long position in May contract (at end of January), hold it for a month and offset the position and so on. At the same
time, deferred contracts can be held for several months. All possible futures returns are shown in the table above (assuming one month
holding period). Presence of a large number of futures returns makes the calculations cumbersome. However, in the present research
work the most liquid futures contracts (first and second nearest month contracts) are used for calculating returns and implementation
of momentum and term structure strategies. We assume that the investor takes the position in second nearest futures contract (long or
short position) and holds that position for a month. At the end of the contract, investor offsets his position by taking equal and
opposite position and takes new position again in the second nearest futures contract.
Futures returns can be broken down into spot return and roll returns. For calculation of spot and roll returns, first nearby and second
nearby (that consists of nearest futures contract and next nearest futures contract respectively) price series were constructed. Spot
returns were calculated using first nearby price series. Roll returns were calculated as the difference between the futures return and
spot return. Roll returns were used to know the term-structure of commodities.
Calculations of futures return, spot return and roll return:
84
Appendix D1: Descriptive statistics of stocks, bonds and commodity futures returns.
2004 STOCK BONDS GOLD
REF SOY OIL
RUBBER SILVER 2 RBS PALM
OLEIN SOYBEAN
MUSTARD SEED OIL
MUSTARD SEED 2
Annual Returns 0.2065 -0.0269 0.0071 -0.0453 0.1830 0.1519 -0.1304 -0.0759 -0.0846 -0.0818
Standard Error 0.0222 0.0050 0.0087 0.0126 0.0190 0.0290 0.0106 0.0238 0.0040 0.0106
Std. Dev. 0.0735 0.0167 0.0290 0.0418 0.0629 0.0962 0.0352 0.0791 0.0134 0.0350
Variance 0.0054 0.0003 0.0008 0.0017 0.0040 0.0092 0.0012 0.0063 0.0002 0.0012
Kurtosis 4.2145 0.5382 0.7666 -0.9808 0.9856 1.3353 5.3587 -0.1856 2.0388 3.8872
Skewness -1.7156 1.0036 -1.1739 -0.3319 0.3729 -0.9297 -2.0482 0.2567 -1.5205 1.3784
Range 0.2674 0.0541 0.0919 0.1283 0.2282 0.3514 0.1372 0.2630 0.0460 0.1391
Minimum -0.1709 -0.0210 -0.0599 -0.0716 -0.0819 -0.1942 -0.1039 -0.1261 -0.0386 -0.0588
Maximum 0.0965 0.0331 0.0319 0.0567 0.1463 0.1571 0.0333 0.1369 0.0074 0.0803
2005
STOCK BONDS GUAR SEED
CHANA SILVER CRUDE
OIL GOLD
GUAR GUM
SOYBEAN
SUGAR M
GRADE 2
REF SOY OIL
PEPPER MUSTARD
SEED 2 JEERA
Annual Returns 0.3989 0.0504 0.2018 0.1122 0.1947 0.2759 0.1780 0.3027 -0.1990 -0.0860 -0.1313 -0.2535 0.0071 -0.4294
Standard Error 0.0207 0.0037 0.0563 0.0152 0.0133 0.0218 0.0117 0.0645 0.0153 0.0119 0.0114 0.0174 0.0103 0.0233
Std. Dev. 0.0685 0.0122 0.1869 0.0504 0.0442 0.0724 0.0389 0.2139 0.0507 0.0393 0.0377 0.0578 0.0343 0.0772
Variance 0.0047 0.0001 0.0349 0.0025 0.0020 0.0052 0.0015 0.0458 0.0026 0.0015 0.0014 0.0033 0.0012 0.0060
Kurtosis -0.6842 1.8222 2.7078 -0.7667 -1.4039 -1.2712 -0.3501 3.3117 -1.0983 -0.9943 1.4717 0.3403 0.4216 4.3361
Skewness -0.6791 -0.8932 0.5695 -0.1085 -0.4366 0.0278 0.0682 0.7562 -0.2026 -0.4347 1.3705 0.8353 0.0432 1.9339
Range 0.2069 0.0446 0.7661 0.1579 0.1200 0.2202 0.1299 0.8901 0.1471 0.1200 0.1249 0.1899 0.1218 0.2597
Minimum -0.0881 -0.0234 -0.3320 -0.0751 -0.0526 -0.0824 -0.0480 -0.3689 -0.0945 -0.0743 -0.0524 -0.1044 -0.0560 -0.0956
Maximum 0.1187 0.0212 0.4340 0.0829 0.0674 0.1377 0.0818 0.5212 0.0526 0.0457 0.0725 0.0855 0.0658 0.1641
85
2006 STOCK BONDS
GUAR SEED
SILVER CHANA GOLD COPPER PEPPER CRUDE OIL WHEAT
NEW MENTHAOIL
Annual Returns 0.3464 0.0279 -0.1021 0.1835 0.3431 -0.0398 0.4309 0.3044 -0.3038 0.1584 -0.2773
Standard Error 0.0190 0.0054 0.0254 0.0344 0.0320 0.0173 0.0402 0.0527 0.0215 0.0209 0.0503
Std. Dev. 0.0629 0.0178 0.0842 0.1140 0.1063 0.0573 0.1332 0.1749 0.0714 0.0694 0.1669
Variance 0.0040 0.0003 0.0071 0.0130 0.0113 0.0033 0.0177 0.0306 0.0051 0.0048 0.0279
Kurtosis 5.0129 0.8068 -0.3353 -0.5079 -1.4543 2.9539 2.2782 3.4070 -1.2554 -1.1758 2.1689
Skewness -1.8443 -0.4181 -0.2831 0.4276 -0.2409 1.2235 1.3900 1.2709 -0.0510 0.4333 -0.8163
Range 0.2426 0.0621 0.2721 0.3650 0.3109 0.2202 0.4674 0.6955 0.2184 0.1988 0.6537
Minimum -0.1356 -0.0344 -0.1459 -0.1528 -0.1247 -0.0859 -0.1150 -0.2445 -0.1330 -0.0678 -0.4006
Maximum 0.1070 0.0277 0.1262 0.2122 0.1862 0.1342 0.3524 0.4510 0.0855 0.1310 0.2531
2006 SILVER 2 SOYBEAN CHILLI JEERA
SUGAR M GRADE 2
REF SOY OIL
COTTON SEED OIL CAKE 2
GUAR GUM
CARDAMOM URAD TURMERIC
Annual Returns 0.3411 -0.0145 0.2108 0.0697 -0.3460 0.1898 0.2594 -0.1431 0.2803 0.9591 -0.4662
Standard Error 0.0359 0.0142 0.0521 0.0254 0.0124 0.0147 0.0346 0.0258 0.0542 0.0387 0.0236
Std. Dev. 0.1189 0.0471 0.1727 0.0843 0.0412 0.0486 0.1149 0.0855 0.1799 0.1284 0.0784
Variance 0.0141 0.0022 0.0298 0.0071 0.0017 0.0024 0.0132 0.0073 0.0324 0.0165 0.0062
Kurtosis -0.9043 1.7991 0.1411 5.9543 -1.3602 -0.6333 7.3160 -0.7035 0.4817 -1.9656 2.7762
Skewness 0.3767 1.1891 0.4859 2.1896 -0.3129 0.6045 2.4497 -0.1822 0.9606 -0.0157 -1.2303
Range 0.3551 0.1731 0.6035 0.3186 0.1178 0.1544 0.4425 0.2720 0.5766 0.3176 0.2963
Minimum -0.1343 -0.0667 -0.2462 -0.0847 -0.0968 -0.0458 -0.0997 -0.1466 -0.1991 -0.0888 -0.2266
Maximum 0.2208 0.1065 0.3572 0.2338 0.0210 0.1086 0.3428 0.1253 0.3775 0.2289 0.0697
2007 STOCK BONDS SILVER COPPER CRUDE OIL GOLD PEPPER GUAR SEED CHANA ZINC JEERA
Annual Returns 0.4940 0.0618 -0.3009 0.0071 0.4131 -0.0263 -0.2054 -0.4362 -0.1045 -0.6747 -0.1493
Standard Error 0.0214 0.0032 0.0183 0.0195 0.0223 0.0126 0.0364 0.0184 0.0239 0.0176 0.0381
Std. Dev. 0.0710 0.0108 0.0606 0.0648 0.0740 0.0419 0.1207 0.0610 0.0793 0.0583 0.1265
Variance 0.0050 0.0001 0.0037 0.0042 0.0055 0.0018 0.0146 0.0037 0.0063 0.0034 0.0160
Kurtosis 0.3532 0.8464 -0.5349 -1.6899 -0.9018 -0.9978 1.9016 -0.8132 3.4215 0.2025 -0.8409
Skewness 0.2756 0.0254 0.5069 0.1427 -0.2220 -0.0980 1.3216 0.9793 1.6195 1.0781 0.5161
Range 0.2560 0.0406 0.1970 0.1825 0.2361 0.1267 0.4110 0.1619 0.2892 0.1790 0.3908
Minimum -0.0806 -0.0153 -0.1055 -0.0808 -0.0818 -0.0735 -0.1460 -0.0978 -0.1003 -0.1181 -0.1699
Maximum 0.1754 0.0253 0.0915 0.1017 0.1544 0.0532 0.2650 0.0641 0.1889 0.0609 0.2208
86
2007 SOYBEAN
MUSTARD SEED 2
NICKEL NATURALGAS REF SOY
OIL SUGAR M GRADE 2
COTTON SEED OIL CAKE 2
TURMERIC CHILLI MENTHAOIL POTATO
Annual Returns 0.3249 0.0090 -0.6154 -0.6088 0.1399 -0.1427 0.3421 -0.0507 0.0385 -0.3344 0.0971
Standard Error 0.0151 0.0163 0.0281 0.0209 0.0103 0.0169 0.0263 0.0159 0.0414 0.0150 0.0297
Std. Dev. 0.0501 0.0540 0.0931 0.0694 0.0343 0.0560 0.0873 0.0528 0.1374 0.0499 0.0984
Variance 0.0025 0.0029 0.0087 0.0048 0.0012 0.0031 0.0076 0.0028 0.0189 0.0025 0.0097
Kurtosis -0.9276 -1.5092 -0.3379 -0.9848 1.0070 2.4354 0.0181 0.1896 2.2626 0.2483 5.6904
Skewness 0.1118 0.0299 -0.6240 0.0649 -1.2450 -1.4932 0.0281 0.6382 1.4806 -0.3897 2.2127
Range 0.1538 0.1519 0.3075 0.2205 0.1105 0.2045 0.2998 0.1715 0.4491 0.1776 0.3537
Minimum -0.0449 -0.0801 -0.2267 -0.1548 -0.0612 -0.1439 -0.1326 -0.0755 -0.1173 -0.1252 -0.0808
Maximum 0.1088 0.0717 0.0807 0.0656 0.0493 0.0606 0.1672 0.0961 0.3318 0.0524 0.2729
2008 STOCK BONDS GOLD SILVER CRUDE OIL COPPER GUAR SEED
MUSTARD SEED 2
SOYBEAN ZINC PEPPER
Annual Returns -0.502 0.196 0.150 -0.331 -0.468 -0.605 -0.591 0.277 0.232 -0.659 -0.484
Standard Error 0.033 0.013 0.023 0.030 0.054 0.040 0.021 0.031 0.028 0.031 0.021
Std. Dev. 0.111 0.043 0.076 0.099 0.178 0.132 0.071 0.103 0.091 0.103 0.071
Variance 0.012 0.002 0.006 0.010 0.032 0.017 0.005 0.011 0.008 0.011 0.005
Kurtosis -0.018 0.982 -0.921 -0.351 -1.150 0.738 -1.192 -0.741 -1.535 2.809 2.075
Skewness -0.668 0.589 -0.302 -0.458 -0.331 -0.555 -0.300 0.558 0.012 -1.191 -0.754
Range 0.355 0.157 0.244 0.319 0.501 0.476 0.199 0.324 0.251 0.401 0.278
Minimum -0.264 -0.057 -0.124 -0.190 -0.324 -0.316 -0.156 -0.121 -0.113 -0.298 -0.196
Maximum 0.091 0.100 0.120 0.129 0.177 0.160 0.043 0.202 0.139 0.103 0.082
2008 NICKEL LEAD
SUGAR M GRADE
COTTON SEED OIL CAKE 2
TURMERIC JEERA NATURALGAS MENTHAOIL KAPAS LIGHT SWEET
CRUDE OIL MAIZE
Annual Returns -0.761 -0.839 -0.111 0.012 -0.013 -0.096 -0.186 0.121 -0.209 -0.487 -0.092
Standard Error 0.040 0.046 0.015 0.020 0.041 0.028 0.047 0.039 0.014 0.050 0.022
Std. Dev. 0.131 0.152 0.049 0.065 0.137 0.093 0.157 0.128 0.047 0.167 0.074
Variance 0.017 0.023 0.002 0.004 0.019 0.009 0.025 0.016 0.002 0.028 0.005
Kurtosis -1.550 0.098 2.533 -0.304 0.845 0.444 -0.298 2.052 -1.153 -1.176 -0.061
Skewness 0.381 0.955 1.361 -0.702 0.934 0.523 -0.569 1.110 -0.335 -0.257 0.656
Range 0.346 0.444 0.182 0.198 0.480 0.316 0.512 0.475 0.142 0.475 0.238
Minimum -0.210 -0.243 -0.076 -0.127 -0.186 -0.134 -0.323 -0.172 -0.096 -0.302 -0.099
Maximum 0.136 0.201 0.106 0.071 0.295 0.182 0.190 0.303 0.045 0.173 0.139
87
2009 STOCK BONDS CRUDE OIL GOLD COPPER SILVER NATURALGAS NICKEL
GUAR SEED
SOYBEAN ZINC
Annual Returns 0.7235 -0.0285 0.3203 0.1727 0.7755 0.2759 -0.6085 0.4826 0.4118 0.0478 0.7651
Standard Error 0.0300 0.0031 0.0205 0.0147 0.0169 0.0229 0.0349 0.0318 0.0231 0.0220 0.0129
Std. Dev. 0.0995 0.0103 0.0679 0.0487 0.0562 0.0759 0.1156 0.1056 0.0767 0.0730 0.0426
Variance 0.0099 0.0001 0.0046 0.0024 0.0032 0.0058 0.0134 0.0111 0.0059 0.0053 0.0018
Kurtosis 1.3013 1.7256 2.7967 -0.4202 0.6722 -1.0094 -0.0466 -1.7467 -1.4306 -0.7904 -0.4855
Skewness 0.8981 0.6289 1.5067 0.2826 0.2183 -0.0295 0.7591 -0.3892 0.0000 0.3228 0.6781
Range 0.3532 0.0400 0.2308 0.1602 0.2089 0.2453 0.3831 0.2689 0.2273 0.2318 0.1348
Minimum -0.0724 -0.0200 -0.0389 -0.0582 -0.0385 -0.1004 -0.2158 -0.1197 -0.0766 -0.1095 0.0122
Maximum 0.2808 0.0199 0.1919 0.1019 0.1704 0.1449 0.1673 0.1493 0.1507 0.1222 0.1470
2009 CHANA LEAD
MUSTARD SEED 2
REF SOY OIL
PEPPER TURMERIC GUAR GUM
SUGAR M GRADE
JEERA ALUMINIUM COTTON SEED OIL CAKE 2
Annual Returns -0.2993 0.7313 0.2499 0.0892 0.0866 1.3387 0.4024 0.1890 0.1591 0.4114 0.0501
Standard Error 0.0214 0.0205 0.0148 0.0175 0.0236 0.0452 0.0301 0.0184 0.0357 0.0210 0.0068
Std. Dev. 0.0710 0.0679 0.0490 0.0580 0.0782 0.1500 0.0999 0.0609 0.1185 0.0695 0.0225
Variance 0.0050 0.0046 0.0024 0.0034 0.0061 0.0225 0.0100 0.0037 0.0140 0.0048 0.0005
Kurtosis -1.4428 -0.5986 -0.1366 -0.1139 -1.1440 1.2031 0.9167 1.7791 1.0972 -0.2456 0.4048
Skewness 0.0057 0.2135 0.9345 0.8170 -0.3890 0.9804 0.8766 1.6757 0.7733 0.3752 -0.3213
Range 0.1957 0.2218 0.1469 0.1807 0.2340 0.5233 0.3306 0.1825 0.4164 0.2342 0.0789
Minimum -0.1187 -0.0459 -0.0322 -0.0649 -0.1167 -0.0797 -0.0788 -0.0332 -0.1459 -0.0795 -0.0401
Maximum 0.0770 0.1759 0.1147 0.1158 0.1173 0.4436 0.2518 0.1493 0.2705 0.1547 0.0388
2010 STOCK BONDS CRUDE OIL SILVER GOLD COPPER NICKEL ZINC NATURALGAS GUAR SEED LEAD
Annual Returns 0.2736 0.0134 0.0632 0.6209 0.1941 0.3174 0.2607 0.0528 -0.5235 -0.0130 0.1444
Standard Error 0.0132 0.0026 0.0162 0.0160 0.0121 0.0177 0.0261 0.0256 0.0309 0.0204 0.0263
Std. Dev. 0.0438 0.0085 0.0538 0.0531 0.0401 0.0587 0.0867 0.0848 0.1025 0.0678 0.0871
Variance 0.0019 0.0001 0.0029 0.0028 0.0016 0.0034 0.0075 0.0072 0.0105 0.0046 0.0076
Kurtosis 0.8691 -1.2234 1.5447 0.0174 -0.1094 -0.6452 0.6410 -1.2111 -0.4600 0.4579 -0.3263
Skewness 0.9066 0.1403 -1.1236 0.3989 -0.6043 -0.0517 -0.6333 -0.3494 -0.4162 -0.0453 -0.1022
Range 0.1521 0.0250 0.1902 0.1834 0.1295 0.1852 0.3062 0.2404 0.3248 0.2484 0.2997
Minimum -0.0350 -0.0100 -0.1136 -0.0328 -0.0611 -0.0611 -0.1568 -0.1302 -0.2075 -0.1278 -0.1427
Maximum 0.1171 0.0150 0.0766 0.1507 0.0684 0.1240 0.1494 0.1102 0.1173 0.1206 0.1570
88
2010 SOYBEAN CHANA
REF SOY OIL
PEPPER MUSTARD
SEED 2
LIGHT SWEET
CRUDE OIL ALUMINIUM
COTTON SEED
OILCAKE MENTHAOIL
GUAR GUM
JEERA
Annual Returns 0.1868 -0.1186 0.3036 0.4190 0.0755 0.0495 0.0451 -0.2230 0.7374 0.2048 0.0311
Standard Error 0.0110 0.0122 0.0136 0.0214 0.0097 0.0153 0.0151 0.0120 0.0315 0.0249 0.0228
Std. Dev. 0.0364 0.0404 0.0452 0.0710 0.0323 0.0509 0.0500 0.0397 0.1044 0.0827 0.0757
Variance 0.0013 0.0016 0.0020 0.0050 0.0010 0.0026 0.0025 0.0016 0.0109 0.0068 0.0057
Kurtosis -0.4359 0.3152 -1.2570 -1.1861 0.1403 2.2338 -1.6254 -0.9216 3.2927 3.2490 -1.3420
Skewness 0.7692 -0.6536 0.4571 -0.0601 -0.1873 -1.1386 0.2606 -0.0022 1.4481 0.4557 0.5205
Range 0.1091 0.1356 0.1304 0.2136 0.1104 0.1870 0.1320 0.1268 0.3749 0.3477 0.2019
Minimum -0.0276 -0.0930 -0.0330 -0.0681 -0.0563 -0.1128 -0.0587 -0.0776 -0.0558 -0.1444 -0.0857
Maximum 0.0815 0.0426 0.0974 0.1455 0.0540 0.0742 0.0732 0.0492 0.3191 0.2033 0.1162
2011 STOCK BONDS SILVER GOLD CRUDE OIL COPPER NICKEL ZINC LEAD NATURALGAS
GUAR SEED
Annual Returns -0.159 0.043 0.030 0.222 0.148 -0.219 -0.301 -0.225 -0.110 -0.514 1.052
Standard Error 0.018 0.005 0.045 0.020 0.024 0.022 0.025 0.020 0.020 0.017 0.035
Std. Dev. 0.059 0.015 0.148 0.067 0.079 0.072 0.082 0.066 0.066 0.055 0.115
Variance 0.003 0.000 0.022 0.005 0.006 0.005 0.007 0.004 0.004 0.003 0.013
Kurtosis 0.078 0.672 -1.209 0.050 -0.442 3.347 -1.547 -0.777 3.406 0.419 -0.357
Skewness 0.670 -0.508 -0.002 0.620 0.375 -0.932 -0.053 0.040 -1.696 -0.442 0.467
Range 0.187 0.055 0.448 0.225 0.246 0.297 0.230 0.218 0.237 0.192 0.378
Minimum -0.093 -0.026 -0.203 -0.069 -0.094 -0.189 -0.144 -0.124 -0.173 -0.155 -0.079
Maximum 0.094 0.028 0.246 0.156 0.152 0.108 0.085 0.094 0.064 0.037 0.299
2011 CHANA
REF SOY OIL
LIGHT SWEET
CRUDE OIL SOYBEAN
MUSTARD SEED
ALUMINIUM PEPPER COTTON
SEED OILCAKE
GUAR GUM
MENTHAOIL JEERA
Annual Returns -0.041 0.107 0.135 -0.082 0.097 -0.153 0.319 -0.029 1.177 0.460 -0.169
Standard Error 0.021 0.018 0.024 0.018 0.022 0.009 0.022 0.016 0.042 0.026 0.031
Std. Dev. 0.071 0.061 0.079 0.058 0.073 0.031 0.075 0.052 0.139 0.087 0.101
Variance 0.005 0.004 0.006 0.003 0.005 0.001 0.006 0.003 0.019 0.008 0.010
Kurtosis -0.994 0.558 -0.316 0.253 2.421 -0.813 -0.646 -0.715 0.231 -0.057 -0.320
Skewness -0.136 0.630 0.365 0.297 1.279 -0.312 0.625 0.149 0.921 0.484 0.993
Range 0.228 0.200 0.250 0.212 0.260 0.099 0.221 0.167 0.437 0.298 0.288
Minimum -0.121 -0.063 -0.098 -0.108 -0.078 -0.063 -0.054 -0.080 -0.054 -0.093 -0.121
Maximum 0.107 0.138 0.151 0.103 0.182 0.036 0.167 0.087 0.384 0.205 0.167
89
2012 STOCK BONDS SILVER GOLD CRUDE OIL COPPER NATURALGAS NICKEL LEAD ZINC
REF SOY OIL
Annual Returns 0.1635 0.0836 -0.3028 -0.0484 -0.0642 -0.0601 -0.0473 -0.1955 0.1105 0.0073 0.0295
Standard Error 0.0130 0.0027 0.0139 0.0053 0.0191 0.0099 0.0307 0.0180 0.0176 0.0161 0.0199
Std. Dev. 0.0432 0.0090 0.0462 0.0177 0.0633 0.0328 0.1017 0.0597 0.0583 0.0532 0.0659
Variance 0.0019 0.0001 0.0021 0.0003 0.0040 0.0011 0.0103 0.0036 0.0034 0.0028 0.0043
Kurtosis -0.3434 -0.3643 -1.2682 0.8031 -0.9103 0.0546 -0.8524 -0.4373 -1.4116 0.6026 4.1229
Skewness 0.3118 -0.7281 0.4507 1.4057 -0.5740 -0.9370 -0.4856 0.3940 0.3203 0.1714 -1.9570
Range 0.1440 0.0288 0.1331 0.0538 0.1948 0.1027 0.3154 0.1910 0.1659 0.1941 0.2214
Minimum -0.0589 -0.0107 -0.0840 -0.0205 -0.1150 -0.0658 -0.1849 -0.1081 -0.0679 -0.0995 -0.1664
Maximum 0.0851 0.0180 0.0491 0.0333 0.0798 0.0369 0.1305 0.0829 0.0980 0.0946 0.0551
2012 ALUMINIUM SOYBEAN
MUSTARD SEED
CHANA COTTON
SEED OILCAKE
CARDAMOM MENTHAOIL CASTOR
SEED KAPAS JEERA PEPPER
Annual Returns -0.0933 0.3901 0.1146 0.2180 -0.1717 0.2624 0.0372 -0.0725 -0.3962 -0.3289 0.2573
Standard Error 0.0144 0.0317 0.0200 0.0245 0.0316 0.0558 0.0550 0.0362 0.0271 0.0215 0.0345
Std. Dev. 0.0477 0.1050 0.0664 0.0812 0.1048 0.1852 0.1824 0.1202 0.0900 0.0713 0.1143
Variance 0.0023 0.0110 0.0044 0.0066 0.0110 0.0343 0.0333 0.0144 0.0081 0.0051 0.0131
Kurtosis 0.4421 0.1806 0.3750 -0.5158 -1.4826 -0.7096 0.7874 2.7978 -0.9582 0.3453 6.0905
Skewness 0.4759 -0.6944 -0.8850 0.5494 0.2483 -0.2481 -0.7012 1.4388 -0.3567 -0.2769 2.0886
Range 0.1669 0.3383 0.2129 0.2537 0.2913 0.6123 0.6452 0.4398 0.2800 0.2604 0.4497
Minimum -0.0789 -0.1826 -0.1287 -0.0812 -0.1493 -0.2993 -0.3806 -0.1546 -0.1879 -0.1665 -0.1196
Maximum 0.0880 0.1558 0.0842 0.1725 0.1420 0.3130 0.2647 0.2852 0.0921 0.0939 0.3301
90
Appendix D2: Descriptive statistics of stocks, bonds and commodity futures returns (agricultural commodities).
2005 STOCKS BONDS
GUAR SEED
CHANA GUAR GUM
SOYBEAN SUGAR
M GRADE 2
REF SOY OIL
PEPPER MUSTARD
SEED 2 JEERA URAD
RAW JUTE
Annual Returns 0.399 0.050 0.202 0.112 0.303 -0.199 -0.086 -0.131 -0.254 0.007 -0.608 0.761 0.291
Standard Error 0.021 0.004 0.056 0.015 0.065 0.015 0.012 0.011 0.017 0.010 0.013 0.053 0.010
Std. Dev. 0.069 0.012 0.187 0.050 0.214 0.051 0.039 0.038 0.058 0.034 0.043 0.175 0.034
Variance 0.005 0.000 0.035 0.003 0.046 0.003 0.002 0.001 0.003 0.001 0.002 0.031 0.001
Kurtosis -0.684 1.822 2.708 -0.767 3.312 -1.098 -0.994 1.472 0.340 0.422 -2.045 6.163 0.229
Skewness -0.679 -0.893 0.569 -0.108 0.756 -0.203 -0.435 1.371 0.835 0.043 0.312 2.318 0.635
Range 0.207 0.045 0.766 0.158 0.890 0.147 0.120 0.125 0.190 0.122 0.108 0.618 0.110
Minimum -0.088 -0.023 -0.332 -0.075 -0.369 -0.094 -0.074 -0.052 -0.104 -0.056 -0.096 -0.077 -0.017
Maximum 0.119 0.021 0.434 0.083 0.521 0.053 0.046 0.072 0.085 0.066 0.012 0.540 0.094
2006 STOCKS BONDS GUAR SEED CHANA PEPPER WHEAT NEW MENTHAOIL SOYBEAN CHILLI
Annual Returns 0.346 0.028 -0.102 0.343 0.304 0.158 -0.277 -0.014 0.211
Standard Error 0.019 0.005 0.025 0.032 0.053 0.021 0.050 0.014 0.052
Std. Dev. 0.063 0.018 0.084 0.106 0.175 0.069 0.167 0.047 0.173
Variance 0.004 0.000 0.007 0.011 0.031 0.005 0.028 0.002 0.030
Kurtosis 5.013 0.807 -0.335 -1.454 3.407 -1.176 2.169 1.799 0.141
Skewness -1.844 -0.418 -0.283 -0.241 1.271 0.433 -0.816 1.189 0.486
Range 0.243 0.062 0.272 0.311 0.695 0.199 0.654 0.173 0.603
Minimum -0.136 -0.034 -0.146 -0.125 -0.244 -0.068 -0.401 -0.067 -0.246
Maximum 0.107 0.028 0.126 0.186 0.451 0.131 0.253 0.106 0.357
91
2006 JEERA
SUGAR M GRADE 2
REF SOY OIL COTTON SEED
OIL CAKE 2 GUAR GUM CARDAMOM URAD TURMERIC WHEAT NEW
Annual Returns 0.070 -0.346 0.190 0.259 -0.143 0.280 0.851 -0.466 0.158
Standard Error 0.025 0.012 0.015 0.035 0.026 0.054 0.042 0.024 0.021
Std. Dev. 0.084 0.041 0.049 0.115 0.086 0.180 0.138 0.078 0.069
Variance 0.007 0.002 0.002 0.013 0.007 0.032 0.019 0.006 0.005
Kurtosis 5.954 -1.360 -0.633 7.316 -0.703 0.482 -2.054 2.776 -1.176
Skewness 2.190 -0.313 0.605 2.450 -0.182 0.961 -0.017 -1.230 0.433
Range 0.319 0.118 0.154 0.442 0.272 0.577 0.328 0.296 0.199
Minimum -0.085 -0.097 -0.046 -0.100 -0.147 -0.199 -0.099 -0.227 -0.068
Maximum 0.234 0.021 0.109 0.343 0.125 0.377 0.229 0.070 0.131
2007 STOCKS BONDS PEPPER GUAR SEED CHANA JEERA SOYBEAN
MUSTARD SEED 2
REF SOY OIL
Annual Returns 0.494 0.062 -0.205 -0.436 -0.105 -0.149 0.325 0.009 0.140
Standard Error 0.021 0.003 0.036 0.018 0.024 0.038 0.015 0.016 0.010
Std. Dev. 0.071 0.011 0.121 0.061 0.079 0.127 0.050 0.054 0.034
Variance 0.005 0.000 0.015 0.004 0.006 0.016 0.003 0.003 0.001
Kurtosis 0.353 0.846 1.902 -0.813 3.422 -0.841 -0.928 -1.509 1.007
Skewness 0.276 0.025 1.322 0.979 1.619 0.516 0.112 0.030 -1.245
Range 0.256 0.041 0.411 0.162 0.289 0.391 0.154 0.152 0.110
Minimum -0.081 -0.015 -0.146 -0.098 -0.100 -0.170 -0.045 -0.080 -0.061
Maximum 0.175 0.025 0.265 0.064 0.189 0.221 0.109 0.072 0.049
2007 SUGAR M GRADE 2
COTTON SEED OIL CAKE 2
TURMERIC CHILLI MENTHAOIL POTATO CARDAMOM KAPAS MAIZE
Annual Returns -0.143 0.342 -0.051 0.039 -0.334 0.097 -0.051 0.157 -0.217
Standard Error 0.017 0.026 0.016 0.041 0.015 0.030 0.019 0.023 0.014
Std. Dev. 0.056 0.087 0.053 0.137 0.050 0.098 0.064 0.076 0.047
Variance 0.003 0.008 0.003 0.019 0.002 0.010 0.004 0.006 0.002
Kurtosis 2.435 0.018 0.190 2.263 0.248 5.690 0.750 1.575 -0.463
Skewness -1.493 0.028 0.638 1.481 -0.390 2.213 0.296 -0.507 -0.232
Range 0.205 0.300 0.172 0.449 0.178 0.354 0.241 0.294 0.148
Minimum -0.144 -0.133 -0.075 -0.117 -0.125 -0.081 -0.119 -0.148 -0.094
Maximum 0.061 0.167 0.096 0.332 0.052 0.273 0.123 0.147 0.054
92
2008 STOCKS BONDS GUAR SEED
MUSTARD SEED 2
SOYBEAN PEPPER SUGAR M
GRADE COTTON SEED
OIL CAKE 2 TURMERIC
Annual Returns -0.502 0.196 -0.591 0.277 0.232 -0.484 -0.111 0.012 -0.013
Standard Error 0.033 0.013 0.021 0.031 0.028 0.021 0.015 0.020 0.041
Std. Dev. 0.111 0.043 0.071 0.103 0.091 0.071 0.049 0.065 0.137
Variance 0.012 0.002 0.005 0.011 0.008 0.005 0.002 0.004 0.019
Kurtosis -0.018 0.982 -1.192 -0.741 -1.535 2.075 2.533 -0.304 0.845
Skewness -0.668 0.589 -0.300 0.558 0.012 -0.754 1.361 -0.702 0.934
Range 0.355 0.157 0.199 0.324 0.251 0.278 0.182 0.198 0.480
Minimum -0.264 -0.057 -0.156 -0.121 -0.113 -0.196 -0.076 -0.127 -0.186
Maximum 0.091 0.100 0.043 0.202 0.139 0.082 0.106 0.071 0.295
2008 JEERA MENTHAOIL KAPAS MAIZE GUR GUAR GUM CHILLI CARDAMOM JUTE
Annual Returns -0.096 0.121 -0.209 -0.092 0.184 -0.593 -0.036 0.229 0.094
Standard Error 0.028 0.039 0.014 0.022 0.018 0.022 0.028 0.030 0.016
Std. Dev. 0.093 0.128 0.047 0.074 0.060 0.072 0.094 0.100 0.053
Variance 0.009 0.016 0.002 0.005 0.004 0.005 0.009 0.010 0.003
Kurtosis 0.444 2.052 -1.153 -0.061 1.522 -0.101 0.860 -1.304 0.756
Skewness 0.523 1.110 -0.335 0.656 -1.419 -0.945 1.146 -0.248 1.193
Range 0.316 0.475 0.142 0.238 0.190 0.228 0.312 0.287 0.171
Minimum -0.134 -0.172 -0.096 -0.099 -0.123 -0.194 -0.111 -0.142 -0.061
Maximum 0.182 0.303 0.045 0.139 0.067 0.034 0.201 0.145 0.110
2009 STOCKS BONDS GUAR SEED SOYBEAN CHANA
MUSTARD SEED 2
REF SOY OIL PEPPER TURMERIC
Annual Returns 0.723 -0.029 0.412 0.048 -0.299 0.250 0.089 0.087 1.339
Standard Error 0.030 0.003 0.023 0.022 0.021 0.015 0.017 0.024 0.045
Std. Dev. 0.099 0.010 0.077 0.073 0.071 0.049 0.058 0.078 0.150
Variance 0.010 0.000 0.006 0.005 0.005 0.002 0.003 0.006 0.022
Kurtosis 1.301 1.726 -1.431 -0.790 -1.443 -0.137 -0.114 -1.144 1.203
Skewness 0.898 0.629 0.000 0.323 0.006 0.934 0.817 -0.389 0.980
Range 0.353 0.040 0.227 0.232 0.196 0.147 0.181 0.234 0.523
Minimum -0.072 -0.020 -0.077 -0.110 -0.119 -0.032 -0.065 -0.117 -0.080
Maximum 0.281 0.020 0.151 0.122 0.077 0.115 0.116 0.117 0.444
93
2009 GUAR GUM
SUGAR M GRADE
JEERA COTTON SEED
OIL CAKE 2 MENTHAOIL GUR KAPAS CARDAMOM CHILLI
Annual Returns 0.402 0.189 0.159 0.118 0.104 0.194 0.321 1.135 -0.055
Standard Error 0.030 0.018 0.036 0.009 0.024 0.035 0.025 0.031 0.024
Std. Dev. 0.100 0.061 0.118 0.028 0.079 0.115 0.084 0.104 0.080
Variance 0.010 0.004 0.014 0.001 0.006 0.013 0.007 0.011 0.006
Kurtosis 0.917 1.779 1.097 0.228 0.704 2.221 -0.574 1.320 -0.938
Skewness 0.877 1.676 0.773 0.145 1.002 1.346 0.367 -0.257 0.550
Range 0.331 0.183 0.416 0.102 0.265 0.415 0.267 0.406 0.233
Minimum -0.079 -0.033 -0.146 -0.040 -0.086 -0.127 -0.085 -0.115 -0.108
Maximum 0.252 0.149 0.271 0.062 0.178 0.288 0.181 0.291 0.124
2010 STOCKS BONDS GUAR SEED SOYBEAN CHANA REF SOY OIL PEPPER
MUSTARD SEED 2
COTTON SEED OILCAKE
Annual Returns 0.274 0.013 -0.013 0.187 -0.119 0.304 0.419 0.076 -0.223
Standard Error 0.013 0.003 0.020 0.011 0.012 0.014 0.021 0.010 0.012
Std. Dev. 0.044 0.009 0.068 0.036 0.040 0.045 0.071 0.032 0.040
Variance 0.002 0.000 0.005 0.001 0.002 0.002 0.005 0.001 0.002
Kurtosis 0.869 -1.223 0.458 -0.436 0.315 -1.257 -1.186 0.140 -0.922
Skewness 0.907 0.140 -0.045 0.769 -0.654 0.457 -0.060 -0.187 -0.002
Range 0.152 0.025 0.248 0.109 0.136 0.130 0.214 0.110 0.127
Minimum -0.035 -0.010 -0.128 -0.028 -0.093 -0.033 -0.068 -0.056 -0.078
Maximum 0.117 0.015 0.121 0.082 0.043 0.097 0.145 0.054 0.049
2010 MENTHAOIL GUAR GUM JEERA CARDAMOM KAPAS TURMERIC POTATO GUR WHEAT NEW
Annual Returns 0.737 0.205 0.031 1.064 0.107 1.437 0.404 0.214 0.040
Standard Error 0.031 0.025 0.023 0.056 0.012 0.052 0.047 0.032 0.010
Std. Dev. 0.104 0.083 0.076 0.185 0.041 0.171 0.157 0.105 0.032
Variance 0.011 0.007 0.006 0.034 0.002 0.029 0.025 0.011 0.001
Kurtosis 3.293 3.249 -1.342 -1.123 1.277 -0.656 1.213 0.933 -0.028
Skewness 1.448 0.456 0.521 0.137 -0.428 0.915 0.062 -0.180 0.970
Range 0.375 0.348 0.202 0.526 0.151 0.502 0.603 0.396 0.096
Minimum -0.056 -0.144 -0.086 -0.151 -0.078 -0.079 -0.274 -0.183 -0.033
Maximum 0.319 0.203 0.116 0.375 0.073 0.423 0.329 0.214 0.064
94
2011 STOCKS BONDS GUAR SEED CHANA REF SOY OIL SOYBEAN
MUSTARD SEED
PEPPER COTTON SEED
OILCAKE
Annual Returns -0.159 0.043 1.052 -0.041 0.107 -0.082 0.097 0.319 -0.029
Standard Error 0.018 0.005 0.035 0.021 0.018 0.018 0.022 0.022 0.016
Std. Dev. 0.059 0.015 0.115 0.071 0.061 0.058 0.073 0.075 0.052
Variance 0.003 0.000 0.013 0.005 0.004 0.003 0.005 0.006 0.003
Kurtosis 0.078 0.672 -0.357 -0.994 0.558 0.253 2.421 -0.646 -0.715
Skewness 0.670 -0.508 0.467 -0.136 0.630 0.297 1.279 0.625 0.149
Range 0.187 0.055 0.378 0.228 0.200 0.212 0.260 0.221 0.167
Minimum -0.093 -0.026 -0.079 -0.121 -0.063 -0.108 -0.078 -0.054 -0.080
Maximum 0.094 0.028 0.299 0.107 0.138 0.103 0.182 0.167 0.087
2011 GUAR GUM MENTHAOIL JEERA CARDAMOM KAPAS
SUGAR M GRADE
POTATO TURMERIC CHILLI
Annual Returns 1.177 0.460 -0.169 -1.312 0.038 -0.103 0.024 -0.470 -0.305
Standard Error 0.042 0.026 0.031 0.027 0.044 0.015 0.031 0.036 0.028
Std. Dev. 0.139 0.087 0.101 0.090 0.145 0.049 0.104 0.120 0.093
Variance 0.019 0.008 0.010 0.008 0.021 0.002 0.011 0.014 0.009
Kurtosis 0.231 -0.057 -0.320 0.330 0.855 1.277 -0.184 -0.906 -0.716
Skewness 0.921 0.484 0.993 0.132 -0.207 0.764 -0.750 -0.333 -0.710
Range 0.437 0.298 0.288 0.328 0.544 0.174 0.325 0.359 0.274
Minimum -0.054 -0.093 -0.121 -0.267 -0.282 -0.077 -0.183 -0.230 -0.188
Maximum 0.384 0.205 0.167 0.061 0.261 0.096 0.142 0.129 0.085
2012 STOCKS BONDS REF SOY OIL SOYBEAN MUSTARD SEED CHANA
COTTON SEED OILCAKE CARDAMOM MENTHAOIL
Annual Returns 0.164 0.084 0.030 0.390 0.115 0.218 -0.172 0.262 0.037
Standard Error 0.013 0.003 0.020 0.032 0.020 0.024 0.032 0.056 0.055
Std. Dev. 0.043 0.009 0.066 0.105 0.066 0.081 0.105 0.185 0.182
Variance 0.002 0.000 0.004 0.011 0.004 0.007 0.011 0.034 0.033
Kurtosis -0.343 -0.364 4.123 0.181 0.375 -0.516 -1.483 -0.710 0.787
Skewness 0.312 -0.728 -1.957 -0.694 -0.885 0.549 0.248 -0.248 -0.701
Range 0.144 0.029 0.221 0.338 0.213 0.254 0.291 0.612 0.645
Minimum -0.059 -0.011 -0.166 -0.183 -0.129 -0.081 -0.149 -0.299 -0.381
Maximum 0.085 0.018 0.055 0.156 0.084 0.172 0.142 0.313 0.265
95
2012 CASTOR SEED KAPAS JEERA PEPPER TURMERIC CORIANDER
MAIZE FEED INDUSTRIAL
GRADE
SUGAR M GRADE
POTATO
Annual Returns -0.073 -0.396 -0.329 0.257 0.347 0.050 -0.022 0.044 0.023
Standard Error 0.036 0.027 0.021 0.034 0.050 0.038 0.025 0.017 0.034
Std. Dev. 0.120 0.090 0.071 0.114 0.167 0.126 0.084 0.055 0.114
Variance 0.014 0.008 0.005 0.013 0.028 0.016 0.007 0.003 0.013
Kurtosis 2.798 -0.958 0.345 6.090 1.242 -0.207 -1.393 4.470 -0.392
Skewness 1.439 -0.357 -0.277 2.089 1.168 0.655 0.473 1.773 -0.390
Range 0.440 0.280 0.260 0.450 0.565 0.416 0.220 0.210 0.364
Minimum -0.155 -0.188 -0.166 -0.120 -0.167 -0.157 -0.086 -0.064 -0.200
Maximum 0.285 0.092 0.094 0.330 0.398 0.259 0.134 0.146 0.163
96
Appendix E1: Ex-ante Markowitz composition for unconstrained and constrained portfolios.
UNCONSTRAINED PORTFOLIOS CONSTRAINED PORTFOLIOS
2004 WEIGHTS WEIGHTS
Stocks 1.000 1.000 0.364 0.800 0.750 0.750
Bonds 0.000 0.000 0.000 0.200 0.150 0.150
Naïve Portfolio
0.000
0.100
Commodities
GOLD
0.000
0.000
REF SOY OIL
0.000
0.000
RUBBER
0.463
0.100
SILVER 2
0.174
0.000
RBS PALM OLEIN
0.000
0.000
SOYBEAN
0.000
0.000
MUSTARD SEED OIL
0.000
0.000
MUSTARD SEED 2
0.000
0.000
PM 0.017 0.017 0.016 0.013 0.012 0.014
PSD 0.073 0.073 0.032 0.059 0.056 0.054
SR 0.174 0.174 0.345 0.149 0.144 0.179
2005 WEIGHTS WEIGHTS
Stocks 1.000 0.924 0.243 0.800 0.750 0.750
Bonds 0.000 0.000 0.000 0.200 0.150 0.150
Naïve Portfolio
0.076
0.100
Commodities
GUAR SEED
0.000
0.000
CHANA
0.125
0.000
SILVER
0.216
0.000
CRUDE OIL
0.074
0.000
97
GOLD
0.273
0.000
GUAR GUM
0.068
0.100
SOYBEAN
0.000
0.000
SUGAR M GRADE 2
0.000
0.000
REF SOY OIL
0.000
0.000
PEPPER
0.000
0.000
MUSTARD SEED 2
0.000
0.000
JEERA
0.000
0.000
PM 0.033 0.031 0.020 0.027 0.026 0.028
PSD 0.069 0.063 0.027 0.056 0.051 0.048
SR 0.416 0.417 0.572 0.406 0.408 0.486
2006 WEIGHTS WEIGHTS
Stocks 1.000 1.000 0.158 0.800 0.750 0.750
Bonds 0.000 0.000 0.000 0.200 0.150 0.150
Naïve Portfolio
0.000
0.100
Commodities
GUAR SEED
0.000
0.000
SILVER
0.000
0.000
CHANA
0.000
0.000
GOLD
0.000
0.000
COPPER
0.145
0.000
PEPPER
0.000
0.000
CRUDE OIL
0.000
0.000
WHEAT NEW
0.000
0.000
MENTHAOIL
0.000
0.000
SILVER 2
0.000
0.000
SOYBEAN
0.000
0.000
CHILLI
0.000
0.000
98
JEERA
0.094
0.000
SUGAR M GRADE 2
0.000
0.000
REF SOY OIL
0.246
0.000
COTTON SEED OIL CAKE 2
0.000
0.000
GUAR GUM
0.000
0.000
CARDAMOM
0.000
0.000
URAD
0.357
0.100
TURMERIC
0.000
0.000
PM 0.029 0.029 0.043 0.024 0.023 0.030
PSD 0.063 0.063 0.053 0.052 0.051 0.055
SR 0.380 0.380 0.707 0.356 0.354 0.453
2007 WEIGHTS WEIGHTS
Stocks 0.843 0.843 0.311 0.800 0.750 0.750
Bonds 0.157 0.157 0.316 0.200 0.150 0.150
Naïve Portfolio
0.000
0.100
Commodities
SILVER
0.000
0.000
COPPER
0.000
0.000
CRUDE OIL
0.000
0.000
GOLD
0.000
0.000
PEPPER
0.000
0.000
GUAR SEED
0.000
0.000
CHANA
0.000
0.000
ZINC
0.000
0.000
JEERA
0.000
0.000
SOYBEAN
0.108
0.000
MUSTARD SEED 2
0.000
0.000
NICKEL
0.000
0.000
99
NATURALGAS
0.000
0.000
REF SOY OIL
0.000
0.000
SUGAR M GRADE 2
0.000
0.000
COTTON SEED OIL CAKE 2
0.089
0.000
TURMERIC
0.000
0.000
CHILLI
0.000
0.000
MENTHAOIL
0.000
0.000
POTATO
0.176
0.100
PM 0.036 0.036 0.021 0.034 0.031 0.032
PSD 0.060 0.060 0.021 0.056 0.054 0.048
SR 0.494 0.494 0.710 0.494 0.453 0.550
2008 WEIGHTS WEIGHTS
Stocks 0.000 0.000 0.000 0.800 0.750 0.750
Bonds 1.000 1.000 0.701 0.200 0.150 0.150
Naïve Portfolio
0.000
0.100
Commodities
GOLD
0.081
0.000
SILVER
0.000
0.000
CRUDE OIL
0.000
0.000
COPPER
0.000
0.000
GUAR SEED
0.000
0.000
MUSTARD SEED 2
0.000
0.000
SOYBEAN
0.128
0.100
ZINC
0.000
0.000
PEPPER
0.000
0.000
NICKEL
0.000
0.000
LEAD
0.000
0.000
SUGAR M GRADE
0.000
0.000
100
COTTON SEED OIL CAKE 2
0.000
0.000
TURMERIC
0.000
0.000
JEERA
0.000
0.000
NATURALGAS
0.000
0.000
MENTHAOIL
0.089
0.000
KAPAS
0.000
0.000
LIGHT SWEET CRUDE OIL
0.000
0.000
MAIZE
0.000
0.000
PM 0.016 0.016 0.016 -0.030 -0.031 -0.027
PSD 0.043 0.043 0.030 0.090 0.086 0.088
SR 0.239 0.239 0.325 -0.405 -0.432 -0.378
2009 WEIGHTS WEIGHTS
Stocks 1.000 0.153 0.000 0.800 0.750 0.750
Bonds 0.000 0.000 0.020 0.200 0.150 0.150
Naïve Portfolio
0.847
0.100
Commodities
CRUDE OIL
0.000
0.000
GOLD
0.177
0.000
COPPER
0.069
0.000
SILVER
0.024
0.000
NATURALGAS
0.125
0.000
NICKEL
0.068
0.000
GUAR SEED
0.000
0.000
SOYBEAN
0.199
0.000
ZINC
0.000
0.000
CHANA
0.000
0.000
LEAD
0.142
0.000
MUSTARD SEED 2
0.000
0.000
101
REF SOY OIL
0.000
0.000
PEPPER
0.000
0.000
TURMERIC
0.019
0.100
GUAR GUM
0.000
0.000
SUGAR M GRADE
0.039
0.000
JEERA
0.000
0.000
ALUMINIUM
0.118
0.000
COTTON SEED OIL CAKE 2
0.000
0.000
PM 0.060 0.031 0.020 0.048 0.047 0.056
PSD 0.099 0.024 0.003 0.079 0.074 0.066
SR 0.565 1.115 5.006 0.551 0.585 0.792
2010 WEIGHTS WEIGHTS
Stocks 1.000 0.485 0.164 0.800 0.750 0.750
Bonds 0.000 0.000 0.000 0.200 0.150 0.150
Naïve Portfolio
0.515
0.100
Commodities
CRUDE OIL
0.000
0.000
SILVER
0.000
0.041
GOLD
0.393
0.000
COPPER
0.137
0.000
NICKEL
0.000
0.000
ZINC
0.000
0.000
NATURALGAS
0.000
0.000
GUAR SEED
0.000
0.000
LEAD
0.000
0.000
SOYBEAN
0.000
0.000
CHANA
0.000
0.000
REF SOY OIL
0.000
0.000
102
PEPPER
0.046
0.000
MUSTARD SEED 2
0.196
0.000
LIGHT SWEET CRUDE OIL
0.000
0.000
ALUMINIUM
0.000
0.000
COTTON SEED OILCAKE
0.000
0.000
MENTHAOIL
0.000
0.059
GUAR GUM
0.000
0.000
JEERA
0.064
0.000
PM 0.023 0.017 0.017 0.018 0.018 0.023
PSD 0.044 0.026 0.003 0.035 0.033 0.033
SR 0.434 0.506 4.553 0.415 0.438 0.579
2011 WEIGHTS WEIGHTS
Stocks 0.000 0.000 0.202 0.800 0.750 0.750
Bonds 1.000 0.000 0.000 0.200 0.150 0.150
Naïve Portfolio
1.000
0.100
Commodities
SILVER
0.000
0.000
GOLD
0.208
0.000
CRUDE OIL
0.000
0.000
COPPER
0.000
0.000
NICKEL
0.000
0.000
ZINC
0.000
0.000
LEAD
0.000
0.000
NATURALGAS
0.000
0.000
GUAR SEED
0.036
0.000
CHANA
0.000
0.000
REF SOY OIL
0.000
0.000
LIGHT SWEET CRUDE OIL
0.000
0.000
SOYBEAN
0.000
0.000
103
MUSTARD SEED
0.000
0.000
ALUMINIUM
0.000
0.000
PEPPER
0.165
0.000
COTTON SEED OILCAKE
0.000
0.000
GUAR GUM
0.247
0.100
MENTHAOIL
0.142
0.000
JEERA
0.000
0.000
PM 0.004 0.008 0.038 -0.010 -0.009 0.000
PSD 0.015 0.037 0.033 0.046 0.043 0.041
SR -0.157 0.053 0.973 -0.341 -0.338 -0.137
2012 WEIGHTS WEIGHTS
Stocks 1.000 1.000 0.208 0.800 0.750 0.750
Bonds 0.000 0.000 0.268 0.200 0.150 0.150
Naïve Portfolio
0.000
0.100
Commodities
SILVER
0.000
0.000
GOLD
0.000
0.000
CRUDE OIL
0.000
0.000
COPPER
0.000
0.000
NATURALGAS
0.000
0.000
NICKEL
0.000
0.000
LEAD
0.213
0.000
ZINC
0.000
0.000
REF SOY OIL
0.000
0.000
ALUMINIUM
0.000
0.000
SOYBEAN
0.174
0.100
MUSTARD SEED
0.000
0.000
CHANA
0.116
0.000
COTTON SEED OILCAKE
0.000
0.000
104
CARDAMOM
0.005
0.000
MENTHAOIL
0.000
0.000
CASTOR SEED
0.000
0.000
KAPAS
0.000
0.000
JEERA
0.000
0.000
PEPPER
0.016
0.000
PM 0.014 0.014 0.015 0.012 0.011 0.015
PSD 0.043 0.043 0.022 0.035 0.033 0.032
SR 0.156 0.156 0.367 0.154 0.127 0.235
PM-Portfolio Mean, PSD-Portfolio Standard Deviation, SR-Sharpe Ratio
Appendix E2: Ex-ante Markowitz composition for unconstrained and constrained portfolios (agricultural commodities).
UNCONSTRAINED PORTFOLIOS CONSTRAINED PORTFOLIOS
2005 WEIGHTS WEIGHTS
Stocks 1.000 0.598 0.442 0.800 0.750 0.750
Bonds 0.000 0.000 0.000 0.200 0.150 0.150
Naïve Portfolio
0.402
0.100
Commodities
GUAR SEED
0.000
0.000
CHANA
0.000
0.000
GUAR GUM
0.054
0.000
SOYBEAN
0.000
0.000
SUGAR M GRADE 2
0.000
0.000
REF SOY OIL
0.000
0.000
PEPPER
0.000
0.000
MUSTARD SEED 2
0.052
0.000
JEERA
0.000
0.000
URAD
0.165
0.100
RAW JUTE
0.287
0.000
105
PM 0.033 0.021 0.033 0.027 0.026 0.032
PSD 0.069 0.034 0.021 0.056 0.050 0.041
SR 0.416 0.475 1.356 0.406 0.425 0.657
2006 WEIGHTS WEIGHTS
Stocks 1.000 1.000 0.228 0.800 0.750 0.750
Bonds 0.000 0.000 0.000 0.200 0.150 0.150
Naïve Portfolio
0.000
0.100
Commodities
GUAR SEED
0.000
0.000
CHANA
0.000
0.000
PEPPER
0.000
0.000
WHEAT NEW
0.000
0.000
MENTHAOIL
0.000
0.000
SOYBEAN
0.000
0.000
CHILLI
0.000
0.000
JEERA
0.132
0.000
SUGAR M GRADE 2
0.000
0.000
REF SOY OIL
0.366
0.000
COTTON SEED OIL CAKE 2
0.000
0.000
GUAR GUM
0.000
0.000
CARDAMOM
0.000
0.000
URAD
0.274
0.100
TURMERIC
0.000
0.000
MUSTARD SEED 2
0.000
0.000
PM 0.029 0.029 0.033 0.024 0.023 0.032
PSD 0.063 0.063 0.048 0.052 0.050 0.041
SR 0.380 0.380 0.573 0.356 0.353 0.657
2007 WEIGHTS WEIGHTS
106
Stocks 0.843 0.843 0.312 0.800 0.750 0.750
Bonds 0.157 0.157 0.315 0.200 0.150 0.150
Naïve Portfolio
0.000
0.100
Commodities
PEPPER
0.000
0.000
GUAR SEED
0.000
0.000
CHANA
0.000
0.000
JEERA
0.000
0.000
SOYBEAN
0.108
0.000
MUSTARD SEED 2
0.000
0.000
REF SOY OIL
0.000
0.000
SUGAR M GRADE 2
0.000
0.000
COTTON SEED OIL CAKE 2
0.089
0.000
TURMERIC
0.000
0.000
CHILLI
0.000
0.000
MENTHAOIL
0.000
0.000
POTATO
0.176
0.100
CARDAMOM
0.000
0.000
KAPAS
0.000
0.000
MAIZE
0.000
0.000
PM 0.036 0.036 0.021 0.034 0.031 0.032
PSD 0.060 0.060 0.021 0.056 0.054 0.048
SR 0.494 0.494 0.710 0.494 0.469 0.550
2008 WEIGHTS WEIGHTS
Stocks 0.000 0.000 0.000 0.800 0.750 0.750
Bonds 1.000 1.000 0.482 0.200 0.150 0.150
Naïve Portfolio
0.000
0.100
Commodities
GUAR SEED
0.000
0.000
107
MUSTARD SEED 2
0.000
0.000
SOYBEAN
0.203
0.000
PEPPER
0.000
0.000
SUGAR M GRADE
0.000
0.000
COTTON SEED OIL CAKE 2
0.000
0.000
TURMERIC
0.000
0.000
JEERA
0.000
0.000
MENTHAOIL
0.017
0.000
KAPAS
0.000
0.000
MAIZE
0.000
0.000
GUR
0.215
0.000
GUAR GUM
0.000
0.000
CHILLI
0.000
0.000
CARDAMOM
0.083
0.100
JUTE
0.000
0.000
PM 0.016 0.016 0.017 -0.030 -0.029 -0.027
PSD 0.043 0.043 0.029 0.090 0.086 0.090
SR 0.239 0.239 0.364 -0.405 -0.415 -0.370
2009 WEIGHTS WEIGHTS
Stocks 1.000 0.365 0.433 0.800 0.750 0.750
Bonds 0.000 0.000 0.000 0.200 0.150 0.150
Naïve Portfolio
0.635
0.100
Commodities
GUAR SEED
0.000
0.000
SOYBEAN
0.000
0.000
CHANA
0.000
0.000
MUSTARD SEED 2
0.000
0.000
REF SOY OIL
0.000
0.000
PEPPER
0.000
0.000
108
TURMERIC
0.319
0.100
GUAR GUM
0.000
0.000
SUGAR M GRADE
0.000
0.000
JEERA
0.000
0.000
COTTON SEED OIL CAKE 2
0.000
0.000
MENTHAOIL
0.000
0.000
GUR
0.000
0.000
KAPAS
0.000
0.000
CARDAMOM
0.248
0.000
CHILLI
0.000
0.000
PM 0.060 0.037 0.085 0.048 0.047 0.056
PSD 0.099 0.042 0.042 0.079 0.074 0.066
SR 0.565 0.791 1.948 0.551 0.587 0.792
2010 WEIGHTS WEIGHTS
Stocks 1.000 0.250 0.281 0.800 0.750 0.750
Bonds 0.000 0.000 0.000 0.200 0.150 0.150
Naïve Portfolio
0.750
0.100
Commodities
GUAR SEED
0.000
0.000
SOYBEAN
0.170
0.000
CHANA
0.000
0.000
REF SOY OIL
0.181
0.000
PEPPER
0.000
0.000
MUSTARD SEED 2
0.028
0.000
COTTON SEED OILCAKE
0.000
0.000
MENTHAOIL
0.117
0.000
GUAR GUM
0.000
0.000
JEERA
0.000
0.000
CARDAMOM
0.096
0.056
109
KAPAS
0.000
0.000
TURMERIC
0.051
0.044
POTATO
0.000
0.000
GUR
0.076
0.000
WHEAT NEW
0.000
0.000
PM 0.023 0.025 0.037 0.018 0.020 0.027
PSD 0.044 0.023 0.020 0.035 0.033 0.035
SR 0.434 0.893 1.681 0.415 0.481 0.685
2011 WEIGHTS WEIGHTS
Stocks 0.000 0.000 0.117 0.800 0.750 0.750
Bonds 1.000 0.000 0.000 0.200 0.150 0.150
Naïve Portfolio
1.000
0.100
Commodities
GUAR SEED
0.267
0.000
CHANA
0.000
0.000
REF SOY OIL
0.000
0.000
SOYBEAN
0.000
0.000
MUSTARD SEED
0.000
0.000
PEPPER
0.397
0.000
COTTON SEED OILCAKE
0.000
0.000
GUAR GUM
0.092
0.100
MENTHAOIL
0.071
0.000
JEERA
0.000
0.000
CARDAMOM
0.000
0.000
KAPAS
0.056
0.000
SUGAR M GRADE
0.000
0.000
POTATO
0.000
0.000
TURMERIC
0.000
0.000
CHILLI
0.000
0.000
110
PM 0.004 0.004 0.044 -0.010 -0.009 0.000
PSD 0.015 0.048 0.040 0.046 0.043 0.041
SR -0.157 -0.041 0.956 -0.341 -0.348 -0.137
2012 WEIGHTS WEIGHTS
Stocks 1.000 1.000 0.559 0.800 0.750 0.750
Bonds 0.000 0.000 0.000 0.200 0.150 0.150
Naïve Portfolio
0.000
0.100
Commodities
REF SOY OIL
0.000
0.000
SOYBEAN
0.239
0.100
MUSTARD SEED
0.000
0.000
CHANA
0.125
0.000
COTTON SEED OILCAKE
0.000
0.000
CARDAMOM
0.000
0.000
MENTHAOIL
0.000
0.000
CASTOR SEED
0.000
0.000
KAPAS
0.000
0.000
JEERA
0.000
0.000
PEPPER
0.000
0.000
TURMERIC
0.077
0.000
CORIANDER
0.000
0.000
MAIZE FEED INDUSTRIAL
GRADE 0.000
0.000
SUGAR M GRADE
0.000
0.000
POTATO
0.000
0.000
PM 0.014 0.014 0.020 0.012 0.012 0.015
PSD 0.043 0.043 0.037 0.035 0.033 0.032
SR 0.156 0.156 0.353 0.154 0.145 0.235
PM-Portfolio Mean, PSD-Portfolio Standard Deviation, SR-Sharpe Ratio
111
Appendix F: Diagrammatic representation to explain the formation of commodity futures portfolios.
Top four commodities
based on returns
Bottom four commodities
based on returns
Momentum
Long
Momentum
Short
Momentum
Long Short
Term
Structure
Long
Term
Structure
Short
Term
Structure
Long Short
Momentum strategies are based on
Futures Return
Term Structure strategies are based
on Roll Return
112
Appendix G1: Summary of commodity futures returns and roll returns.
2004 Futures Returns Roll Returns 2005 Futures Returns Roll Returns 2006 Futures Returns Roll Returns
GOLD 0.06% -0.43% GUAR SEED 1.68% -1.75% GUAR SEED -0.85% -2.29%
REF SOY OIL -0.38% 0.80% CHANA 0.93% -1.62% SILVER 1.53% -2.09%
RUBBER 1.52% 0.71% SILVER 1.62% -0.90% CHANA 2.86% -0.92%
SILVER 2 1.27% 0.13% CRUDE OIL 2.30% -0.80% GOLD -0.33% -1.62%
RBS PALM OLEIN -1.09% -0.65% GOLD 1.48% -0.81% COPPER 3.59% 0.34%
SOYBEAN -0.63% 0.57% GUAR GUM 2.52% -2.08% PEPPER 2.54% -3.18%
MUSTARD SEED OIL -0.70% 0.34% SOYBEAN -1.66% -1.43% CRUDE OIL -2.53% -2.01%
MUSTARD SEED 2 -0.68% 0.13% SUGAR M GRADE 2 -0.72% -0.69% WHEAT NEW 1.32% -0.64%
REF SOY OIL -1.09% -0.66% MENTHAOIL -2.31% -1.89%
PEPPER -2.11% -2.47% SILVER 2 2.84% -0.89%
MUSTARD SEED 2 0.06% 0.17% SOYBEAN -0.12% -1.49%
JEERA -3.58% -2.60% CHILLI 1.76% -3.74%
JEERA 0.58% -3.89%
SUGAR M GRADE 2 -2.88% -0.97%
REF SOY OIL 1.58% -1.35%
COTTON SEED OIL CAKE 2 2.16% 1.14%
GUAR GUM -1.19% -2.30%
CARDAMOM 2.34% -2.63%
URAD 7.99% 5.48%
TURMERIC -3.88% -3.76%
2007 Futures Returns Roll Returns 2008 Futures Returns Roll Returns 2009 Futures Returns Roll Returns
SILVER -2.51% -2.47% GOLD 1.25% -0.41% CRUDE OIL 2.67% -3.10%
COPPER 0.06% -0.48% SILVER -2.76% -1.74% GOLD 1.44% 0.02%
CRUDE OIL 3.44% -0.50% CRUDE OIL -3.90% -0.25% COPPER 6.46% -1.04%
GOLD -0.22% -1.54% COPPER -5.04% -0.32% SILVER 2.30% -0.69%
PEPPER -1.71% -2.57% GUAR SEED -4.93% -3.17% NATURALGAS -5.07% -8.11%
GUAR SEED -3.63% -2.18% MUSTARD SEED 2 2.31% 0.22% NICKEL 4.02% -0.81%
CHANA -0.87% 0.04% SOYBEAN 1.93% 1.89% GUAR SEED 3.43% -1.92%
ZINC -5.62% -1.10% ZINC -5.49% -1.45% SOYBEAN 0.40% -0.16%
JEERA -1.24% -3.07% PEPPER -4.04% -1.49% ZINC 6.38% -1.10%
SOYBEAN 2.71% -0.54% NICKEL -6.34% -1.48% CHANA -2.49% -3.15%
MUSTARD SEED 2 0.07% -2.01% LEAD -6.99% -0.98% LEAD 6.09% -0.71%
NICKEL -5.13% -1.07% SUGAR M GRADE -0.92% -3.33% MUSTARD SEED 2 2.08% -0.31%
NATURALGAS -5.07% -4.35% COTTON SEED OIL CAKE 2 0.10% -1.17% REF SOY OIL 0.74% -0.06%
REF SOY OIL 1.17% -0.70% TURMERIC -0.11% -2.68% PEPPER 0.72% -1.08%
SUGAR M GRADE 2 -1.19% 0.21% JEERA -0.80% -1.53% TURMERIC 11.16% 3.93%
COTTON SEED OIL CAKE 2 2.85% 1.54% NATURALGAS -1.55% -1.41% GUAR GUM 3.35% -1.73%
TURMERIC -0.42% -3.68% MENTHAOIL 1.01% -1.48% SUGAR M GRADE 1.57% -2.72%
CHILLI 0.32% 1.01% KAPAS -1.74% -0.85% JEERA 1.33% -1.51%
113
MENTHAOIL -2.79% -0.31% LIGHT SWEET CRUDE OIL -4.06% -0.35% ALUMINIUM 3.43% -1.09%
POTATO 0.81% 0.38% MAIZE -0.77% -1.48% COTTON SEED OIL CAKE 2 0.42% -1.77%
2010 Futures Returns Roll Returns 2011 Futures Returns Roll Returns 2012 Futures Returns Roll Returns
CRUDE OIL 0.53% -1.35% SILVER 0.25% -2.17% SILVER -2.52% -2.85%
SILVER 5.17% -0.51% GOLD 1.85% -1.28% GOLD -0.40% -1.28%
GOLD 1.62% -0.73% CRUDE OIL 1.24% -1.10% CRUDE OIL -0.54% -0.89%
COPPER 2.64% -0.69% COPPER -1.83% -1.12% COPPER -0.50% -1.12%
NICKEL 2.17% -0.60% NICKEL -2.51% -0.71% NATURALGAS -0.39% -4.58%
ZINC 0.44% -0.97% ZINC -1.88% -1.02% NICKEL -1.63% -0.96%
NATURALGAS -4.36% -3.23% LEAD -0.91% -0.47% LEAD 0.92% -0.59%
GUAR SEED -0.11% -0.56% NATURALGAS -4.28% -2.53% ZINC 0.06% -0.80%
LEAD 1.20% -1.02% GUAR SEED 8.76% -0.41% REF SOY OIL 0.25% -0.12%
SOYBEAN 1.56% 0.21% CHANA -0.34% -2.86% ALUMINIUM -0.78% -1.04%
CHANA -0.99% -2.49% REF SOY OIL 0.89% -0.27% SOYBEAN 3.25% 0.15%
REF SOY OIL 2.53% -0.81% LIGHT SWEET CRUDE OIL 1.12% -1.22% MUSTARD SEED 0.95% -1.43%
PEPPER 3.49% -1.47% SOYBEAN -0.68% -1.02% CHANA 1.82% -0.28%
MUSTARD SEED 2 0.63% -1.08% MUSTARD SEED 0.81% -1.71% COTTON SEED OILCAKE -1.43% -2.60%
LIGHT SWEET CRUDE OIL 0.41% -1.31% ALUMINIUM -1.28% -0.66% CARDAMOM 2.19% -3.76%
ALUMINIUM 0.38% -1.03% PEPPER 2.66% -1.22% MENTHAOIL 0.31% -0.55%
COTTON SEED OILCAKE -1.86% -0.77% COTTON SEED OILCAKE -0.24% -1.19% CASTOR SEED -0.60% -1.61%
MENTHAOIL 6.15% -0.80% GUAR GUM 9.80% -1.45% KAPAS -3.30% -4.61%
GUAR GUM 1.71% -1.31% MENTHAOIL 3.83% 2.05% JEERA -2.74% -2.96%
JEERA 0.26% -1.76% JEERA -1.41% -2.64% PEPPER 2.14% 0.14%
Appendix G2: List of commodities sorted on basis of futures returns and roll returns.
Futures Returns Roll Returns Futures Returns Roll Returns Futures Returns Roll Returns
2004 2004 2005 2005 2006 2006
RUBBER REF SOY OIL GUAR GUM MUSTARD SEED 2 URAD URAD
SILVER 2 RUBBER CRUDE OIL REF SOY OIL COPPER COTTON SEED OIL CAKE 2
GOLD SOYBEAN GUAR SEED SUGAR M GRADE 2 CHANA COPPER
REF SOY OIL MUSTARD SEED OIL SILVER CRUDE OIL SILVER 2 WHEAT NEW
SOYBEAN MUSTARD SEED 2 GOLD GOLD PEPPER SILVER 2
MUSTARD SEED 2 SILVER 2 CHANA SILVER CARDAMOM CHANA
MUSTARD SEED OIL GOLD MUSTARD SEED 2 SOYBEAN COTTON SEED OIL CAKE 2 SUGAR M GRADE 2
RBS PALM OLEIN RBS PALM OLEIN SUGAR M GRADE 2 CHANA CHILLI REF SOY OIL
REF SOY OIL GUAR SEED REF SOY OIL SOYBEAN
SOYBEAN GUAR GUM SILVER GOLD
PEPPER PEPPER WHEAT NEW MENTHAOIL
JEERA JEERA JEERA CRUDE OIL
114
SOYBEAN SILVER
GOLD GUAR SEED
GUAR SEED GUAR GUM
GUAR GUM CARDAMOM
MENTHAOIL PEPPER
CRUDE OIL CHILLI
SUGAR M GRADE 2 TURMERIC
TURMERIC JEERA
Futures Returns Roll Returns Futures Returns Roll Returns Futures Returns Roll Returns
2007 2007 2008 2008 2009 2009
CRUDE OIL COTTON SEED OIL CAKE 2 MUSTARD SEED 2 SOYBEAN TURMERIC TURMERIC
COTTON SEED OIL CAKE 2 CHILLI SOYBEAN MUSTARD SEED 2 COPPER GOLD
SOYBEAN POTATO GOLD CRUDE OIL ZINC REF SOY OIL
REF SOY OIL SUGAR M GRADE 2 MENTHAOIL COPPER LEAD SOYBEAN
POTATO CHANA COTTON SEED OIL CAKE 2 LIGHT SWEET CRUDE OIL NICKEL MUSTARD SEED 2
CHILLI MENTHAOIL TURMERIC GOLD GUAR SEED SILVER
MUSTARD SEED 2 COPPER MAIZE KAPAS ALUMINIUM LEAD
COPPER CRUDE OIL JEERA LEAD GUAR GUM NICKEL
GOLD SOYBEAN SUGAR M GRADE COTTON SEED OIL CAKE 2 CRUDE OIL COPPER
TURMERIC REF SOY OIL NATURALGAS NATURALGAS SILVER PEPPER
CHANA NICKEL KAPAS ZINC MUSTARD SEED 2 ALUMINIUM
SUGAR M GRADE 2 ZINC SILVER NICKEL SUGAR M GRADE ZINC
JEERA GOLD CRUDE OIL MENTHAOIL GOLD JEERA
PEPPER MUSTARD SEED 2 PEPPER MAIZE JEERA GUAR GUM
SILVER GUAR SEED LIGHT SWEET CRUDE OIL PEPPER REF SOY OIL COTTON SEED OIL CAKE 2
MENTHAOIL SILVER GUAR SEED JEERA PEPPER GUAR SEED
GUAR SEED PEPPER COPPER SILVER COTTON SEED OIL CAKE 2 SUGAR M GRADE
NATURALGAS JEERA ZINC TURMERIC SOYBEAN CRUDE OIL
NICKEL TURMERIC NICKEL GUAR SEED CHANA CHANA
ZINC NATURALGAS LEAD SUGAR M GRADE NATURALGAS NATURALGAS
Futures Returns Roll Returns Futures Returns Roll Returns Futures Returns Roll Returns
2010 2010 2011 2011 2012 2012
MENTHAOIL SOYBEAN GUAR GUM MENTHAOIL SOYBEAN SOYBEAN
SILVER SILVER GUAR SEED REF SOY OIL CARDAMOM PEPPER
PEPPER GUAR SEED MENTHAOIL GUAR SEED PEPPER REF SOY OIL
COPPER NICKEL PEPPER LEAD CHANA CHANA
REF SOY OIL COPPER GOLD ALUMINIUM MUSTARD SEED MENTHAOIL
NICKEL GOLD CRUDE OIL NICKEL LEAD LEAD
GUAR GUM COTTON SEED OILCAKE LIGHT SWEET CRUDE OIL ZINC MENTHAOIL ZINC
GOLD MENTHAOIL REF SOY OIL SOYBEAN REF SOY OIL CRUDE OIL
115
SOYBEAN REF SOY OIL MUSTARD SEED CRUDE OIL ZINC NICKEL
LEAD ZINC SILVER COPPER NATURALGAS ALUMINIUM
MUSTARD SEED 2 LEAD COTTON SEED OILCAKE COTTON SEED OILCAKE GOLD COPPER
CRUDE OIL ALUMINIUM CHANA LIGHT SWEET CRUDE OIL COPPER GOLD
ZINC MUSTARD SEED 2 SOYBEAN PEPPER CRUDE OIL MUSTARD SEED
LIGHT SWEET CRUDE OIL LIGHT SWEET CRUDE OIL LEAD GOLD CASTOR SEED CASTOR SEED
ALUMINIUM GUAR GUM ALUMINIUM GUAR GUM ALUMINIUM COTTON SEED OILCAKE
JEERA CRUDE OIL JEERA MUSTARD SEED COTTON SEED OILCAKE SILVER
GUAR SEED PEPPER COPPER SILVER NICKEL JEERA
CHANA JEERA ZINC NATURALGAS SILVER CARDAMOM
COTTON SEED OILCAKE CHANA NICKEL JEERA JEERA NATURALGAS
NATURALGAS NATURALGAS NATURALGAS CHANA KAPAS KAPAS
Appendix G3: List of commodities selected for forming investment strategies.
Momentum Long Only
2005 RUBBER SILVER 2 GOLD REF SOY OIL
2006 GUAR GUM CRUDE OIL GUAR SEED SILVER
2007 URAD COPPER CHANA SILVER 2
2008 CRUDE OIL COTTON SEED OIL CAKE 2 SOYBEAN REF SOY OIL
2009 MUSTARD SEED 2 SOYBEAN GOLD MENTHAOIL
2010 TURMERIC COPPER ZINC LEAD
2011 MENTHAOIL SILVER PEPPER COPPER
2012 GUAR GUM GUAR SEED MENTHAOIL PEPPER
Momentum Short Only
2005 SOYBEAN MUSTARD SEED 2 MUSTARD SEED OIL RBS PALM OLEIN
2006 REF SOY OIL SOYBEAN PEPPER JEERA
2007 MENTHAOIL CRUDE OIL SUGAR M GRADE 2 TURMERIC
2008 GUAR SEED NATURALGAS NICKEL ZINC
2009 COPPER ZINC NICKEL LEAD
2010 COTTON SEED OIL CAKE 2 SOYBEAN CHANA NATURALGAS
2011 GUAR SEED CHANA COTTON SEED OILCAKE NATURALGAS
2012 COPPER ZINC NICKEL NATURALGAS
116
Term Structure Long Only
2005 REF SOY OIL RUBBER SOYBEAN MUSTARD SEED OIL
2006 MUSTARD SEED 2 REF SOY OIL SUGAR M GRADE 2 CRUDE OIL
2007 URAD COTTON SEED OIL CAKE 2 COPPER WHEAT NEW
2008 COTTON SEED OIL CAKE 2 CHILLI POTATO SUGAR M GRADE 2
2009 SOYBEAN MUSTARD SEED 2 CRUDE OIL COPPER
2010 TURMERIC GOLD REF SOY OIL SOYBEAN
2011 SOYBEAN SILVER GUAR SEED NICKEL
2012 MENTHAOIL REF SOY OIL GUAR SEED LEAD
Term Structure Short Only
2005 MUSTARD SEED 2 SILVER 2 GOLD RBS PALM OLEIN
2006 GUAR SEED GUAR GUM PEPPER JEERA
2007 PEPPER CHILLI TURMERIC JEERA
2008 PEPPER JEERA TURMERIC NATURALGAS
2009 SILVER TURMERIC GUAR SEED SUGAR M GRADE
2010 SUGAR M GRADE CRUDE OIL CHANA NATURALGAS
2011 PEPPER JEERA CHANA NATURALGAS
2012 SILVER NATURALGAS JEERA CHANA
Momentum Long-Short
2005 Long Position RUBBER SILVER 2 GOLD REF SOY OIL
2005 Short Position SOYBEAN MUSTARD SEED 2 MUSTARD SEED OIL RBS PALM OLEIN
2006 Long Position GUAR GUM CRUDE OIL GUAR SEED SILVER
2006 Short Position REF SOY OIL SOYBEAN PEPPER JEERA
2007 Long Position URAD COPPER CHANA SILVER 2
2007 Short Position MENTHAOIL CRUDE OIL SUGAR M GRADE 2 TURMERIC
2008 Long Position CRUDE OIL COTTON SEED OIL CAKE 2 SOYBEAN REF SOY OIL
2008 Short Position GUAR SEED NATURALGAS NICKEL ZINC
2009 Long Position MUSTARD SEED 2 SOYBEAN GOLD MENTHAOIL
2009 Short Position COPPER ZINC NICKEL LEAD
2010 Long Position TURMERIC COPPER ZINC LEAD
2010 Short Position COTTON SEED OIL CAKE 2 SOYBEAN CHANA NATURALGAS
2011 Long Position MENTHAOIL SILVER PEPPER COPPER
2011 Short Position GUAR SEED CHANA COTTON SEED OILCAKE NATURALGAS
2012 Long Position GUAR GUM GUAR SEED MENTHAOIL PEPPER
2012 Short Position COPPER ZINC NICKEL NATURALGAS
117
Term Structure Long-Short
2005 Long Position REF SOY OIL RUBBER SOYBEAN MUSTARD SEED OIL
2005 Short Position MUSTARD SEED 2 SILVER 2 GOLD RBS PALM OLEIN
2006 Long Position MUSTARD SEED 2 REF SOY OIL SUGAR M GRADE 2 CRUDE OIL
2006 Short Position GUAR SEED GUAR GUM PEPPER JEERA
2007 Long Position URAD COTTON SEED OIL CAKE 2 COPPER WHEAT NEW
2007 Short Position PEPPER CHILLI TURMERIC JEERA
2008 Long Position COTTON SEED OIL CAKE 2 CHILLI POTATO SUGAR M GRADE 2
2008 Short Position PEPPER JEERA TURMERIC NATURALGAS
2009 Long Position SOYBEAN MUSTARD SEED 2 CRUDE OIL COPPER
2009 Short Position SILVER TURMERIC GUAR SEED SUGAR M GRADE
2010 Long Position TURMERIC GOLD REF SOY OIL SOYBEAN
2010 Short Position SUGAR M GRADE CRUDE OIL CHANA NATURALGAS
2011 Long Position SOYBEAN SILVER GUAR SEED NICKEL
2011 Short Position PEPPER JEERA CHANA NATURALGAS
2012 Long Position MENTHAOIL REF SOY OIL GUAR SEED LEAD
2012 Short Position SILVER NATURALGAS JEERA CHANA
118
Appendix H1: Summary of commodity futures returns and roll returns (agricultural commodities).
2005 Futures Returns Roll Returns 2006 Futures Returns Roll Returns 2007 Futures Returns Roll Returns
GUAR SEED 1.68% -1.75% GUAR SEED -0.85% -2.29% PEPPER -1.71% -2.57%
CHANA 0.93% -1.62% CHANA 2.86% -0.92% GUAR SEED -3.63% -2.18%
GUAR GUM 2.52% -2.08% PEPPER 2.54% -3.18% CHANA -0.87% 0.04%
SOYBEAN -1.66% -1.43% WHEAT NEW 1.32% -0.64% JEERA -1.24% -3.07%
SUGAR M GRADE 2 -0.72% -0.69% MENTHAOIL -2.31% -1.89% SOYBEAN 2.71% -0.54%
REF SOY OIL -1.09% -0.66% SOYBEAN -0.12% -1.49% MUSTARD SEED 2 0.07% -2.01%
PEPPER -2.11% -2.47% CHILLI 1.76% -3.74% REF SOY OIL 1.17% -0.70%
MUSTARD SEED 2 0.06% 0.17% JEERA 0.58% -3.89% SUGAR M GRADE 2 -1.19% 0.21%
JEERA -5.07% -2.60% SUGAR M GRADE 2 -2.88% -0.97% COTTON SEED OIL CAKE 2 2.85% 1.54%
URAD 6.34% -0.71% REF SOY OIL 1.58% -1.35% TURMERIC -0.42% -3.68%
RAW JUTE 2.42% 0.91% COTTON SEED OIL CAKE 2 2.16% 1.14% CHILLI 0.32% 1.01%
GUAR GUM -1.19% -2.30% MENTHAOIL -2.79% -0.31%
CARDAMOM 2.33% -2.50% POTATO 0.81% 0.38%
URAD 7.09% 4.58% CARDAMOM -0.43% -4.01%
TURMERIC -3.88% -3.76% KAPAS 1.31% -0.36%
WHEAT NEW 1.32% -0.64% MAIZE -1.81% -1.29%
2008 Futures Returns Roll Returns 2009 Futures Returns Roll Returns 2010 Futures Returns Roll Returns
GUAR SEED -4.93% -3.17% GUAR SEED 3.43% -1.92% GUAR SEED -0.11% -0.56%
MUSTARD SEED 2 2.31% 0.22% SOYBEAN 0.40% -0.16% SOYBEAN 1.56% 0.21%
SOYBEAN 1.93% 1.89% CHANA -2.49% -3.15% CHANA -0.99% -2.49%
PEPPER -4.04% -1.49% MUSTARD SEED 2 2.08% -0.31% REF SOY OIL 2.53% -0.81%
SUGAR M GRADE -0.92% -3.33% REF SOY OIL 0.74% -0.06% PEPPER 3.49% -1.47%
COTTON SEED OIL CAKE 2 0.10% -1.17% PEPPER 0.72% -1.08% MUSTARD SEED 2 0.63% -1.08%
TURMERIC -0.11% -2.68% TURMERIC 11.16% 3.93% COTTON SEED OILCAKE -1.86% -0.77%
JEERA -0.80% -1.53% GUAR GUM 3.35% -1.73% MENTHAOIL 6.15% -0.80%
MENTHAOIL 1.01% -1.48% SUGAR M GRADE 1.57% -2.72% GUAR GUM 1.71% -1.31%
KAPAS -1.74% -0.85% JEERA 1.33% -1.51% JEERA 0.26% -1.76%
MAIZE -0.77% -1.48% COTTON SEED OIL CAKE 2 0.98% -1.21% CARDAMOM 8.86% 3.98%
GUR 1.53% -2.88% MENTHAOIL 0.87% -0.45% KAPAS 0.89% -1.15%
GUAR GUM -4.94% -2.65% GUR 1.62% -2.55% TURMERIC 11.98% 6.23%
CHILLI -0.30% -2.12% KAPAS 2.68% -1.00% POTATO 3.37% 1.15%
CARDAMOM 1.91% 3.59% CARDAMOM 9.46% 2.67% GUR 1.79% 3.21%
JUTE 0.78% -2.70% CHILLI -0.46% -2.00% WHEAT NEW 0.33% 0.23%
119
2011 Futures Returns Roll Returns 2012 Futures Returns Roll Returns
GUAR SEED 8.76% -0.41% REF SOY OIL 0.25% -0.12%
CHANA -0.34% -2.86% SOYBEAN 3.25% 0.15%
REF SOY OIL 0.89% -0.27% MUSTARD SEED 0.95% -1.43%
SOYBEAN -0.68% -1.02% CHANA 1.82% -0.28%
MUSTARD SEED 0.81% -1.71% COTTON SEED OILCAKE -1.43% -2.60%
PEPPER 2.66% -1.22% CARDAMOM 2.19% -3.76%
COTTON SEED OILCAKE -0.24% -1.19% MENTHAOIL 0.31% -0.55%
GUAR GUM 9.80% -1.45% CASTOR SEED -0.60% -1.61%
MENTHAOIL 3.83% 2.05% KAPAS -3.30% -4.61%
JEERA -1.41% -2.64% JEERA -2.74% -2.96%
CARDAMOM -10.93% -4.20% PEPPER 2.14% 0.14%
KAPAS 0.32% 0.03% TURMERIC 2.89% -2.12%
SUGAR M GRADE -0.86% -1.38% CORIANDER 0.42% -3.37%
POTATO 0.20% -1.07% MAIZE FEED INDUSTRIAL GRADE -0.19% -1.53%
TURMERIC -3.92% 1.93% SUGAR M GRADE 0.37% -0.85%
CHILLI -2.54% 0.40% POTATO 0.19% -1.17%
Appendix H2: List of commodities sorted on basis of futures returns and roll returns (agricultural commodities).
Futures Returns Roll Returns Futures Returns Roll Returns Futures Returns Roll Returns
2005 2005 2006 2006 2007 2007
URAD RAW JUTE URAD URAD COTTON SEED OIL CAKE 2 COTTON SEED OIL CAKE 2
GUAR GUM MUSTARD SEED 2 CHANA COTTON SEED OIL CAKE 2 SOYBEAN CHILLI
RAW JUTE REF SOY OIL PEPPER WHEAT NEW KAPAS POTATO
GUAR SEED SUGAR M GRADE 2 CARDAMOM CHANA REF SOY OIL SUGAR M GRADE 2
CHANA URAD COTTON SEED OIL CAKE 2 SUGAR M GRADE 2 POTATO CHANA
MUSTARD SEED 2 SOYBEAN CHILLI REF SOY OIL CHILLI MENTHAOIL
SUGAR M GRADE 2 CHANA REF SOY OIL SOYBEAN MUSTARD SEED 2 KAPAS
REF SOY OIL GUAR SEED WHEAT NEW MENTHAOIL TURMERIC SOYBEAN
SOYBEAN GUAR GUM JEERA GUAR SEED CARDAMOM REF SOY OIL
PEPPER PEPPER SOYBEAN GUAR GUM CHANA MAIZE
JEERA JEERA GUAR SEED CARDAMOM SUGAR M GRADE 2 MUSTARD SEED 2
GUAR GUM PEPPER JEERA GUAR SEED
MENTHAOIL CHILLI PEPPER PEPPER
SUGAR M GRADE 2 TURMERIC MAIZE JEERA
TURMERIC JEERA MENTHAOIL TURMERIC
GUAR SEED CARDAMOM
120
Futures Returns Roll Returns Futures Returns Roll Returns Futures Returns Roll Returns
2008 2008 2009 2009 2010 2010
MUSTARD SEED 2 CARDAMOM TURMERIC TURMERIC TURMERIC TURMERIC
SOYBEAN SOYBEAN CARDAMOM CARDAMOM CARDAMOM CARDAMOM
CARDAMOM MUSTARD SEED 2 GUAR SEED REF SOY OIL MENTHAOIL GUR
GUR KAPAS GUAR GUM SOYBEAN PEPPER POTATO
MENTHAOIL COTTON SEED OIL CAKE 2 KAPAS MUSTARD SEED 2 POTATO WHEAT NEW
JUTE MENTHAOIL MUSTARD SEED 2 MENTHAOIL REF SOY OIL SOYBEAN
COTTON SEED OIL CAKE 2 MAIZE GUR KAPAS GUR GUAR SEED
TURMERIC PEPPER SUGAR M GRADE PEPPER GUAR GUM COTTON SEED OILCAKE
CHILLI JEERA JEERA COTTON SEED OIL CAKE 2 SOYBEAN MENTHAOIL
MAIZE CHILLI COTTON SEED OIL CAKE 2 JEERA KAPAS REF SOY OIL
JEERA GUAR GUM MENTHAOIL GUAR GUM MUSTARD SEED 2 MUSTARD SEED 2
SUGAR M GRADE TURMERIC REF SOY OIL GUAR SEED WHEAT NEW KAPAS
KAPAS JUTE PEPPER CHILLI JEERA GUAR GUM
PEPPER GUR SOYBEAN GUR GUAR SEED PEPPER
GUAR SEED GUAR SEED CHILLI SUGAR M GRADE CHANA JEERA
GUAR GUM SUGAR M GRADE CHANA CHANA COTTON SEED OILCAKE CHANA
Futures Returns Roll Returns Futures Returns Roll Returns
2011 2011 2012 2012
GUAR GUM MENTHAOIL SOYBEAN SOYBEAN
GUAR SEED TURMERIC TURMERIC PEPPER
MENTHAOIL CHILLI CARDAMOM REF SOY OIL
PEPPER KAPAS PEPPER CHANA
REF SOY OIL REF SOY OIL CHANA MENTHAOIL
MUSTARD SEED GUAR SEED MUSTARD SEED SUGAR M GRADE
KAPAS SOYBEAN CORIANDER POTATO
POTATO POTATO SUGAR M GRADE MUSTARD SEED
COTTON SEED OILCAKE COTTON SEED OILCAKE MENTHAOIL MAIZE FEED INDUSTRIAL GRADE
CHANA PEPPER REF SOY OIL CASTOR SEED
SOYBEAN SUGAR M GRADE POTATO TURMERIC
SUGAR M GRADE GUAR GUM MAIZE FEED INDUSTRIAL GRADE COTTON SEED OILCAKE
JEERA MUSTARD SEED CASTOR SEED JEERA
CHILLI JEERA COTTON SEED OILCAKE CORIANDER
TURMERIC CHANA JEERA CARDAMOM
CARDAMOM CARDAMOM KAPAS KAPAS
121
Appendix H3: Commodities selected for forming investment strategies (agricultural commodities).
Momentum Long Only
2006 URAD GUAR GUM RAW JUTE GUAR SEED
2007 URAD CHANA PEPPER CARDAMOM
2008 COTTON SEED OIL CAKE 2 SOYBEAN KAPAS REF SOY OIL
2009 MUSTARD SEED 2 SOYBEAN CARDAMOM GUR
2010 TURMERIC CARDAMOM GUAR SEED GUAR GUM
2011 TURMERIC CARDAMOM MENTHAOIL PEPPER
2012 GUAR GUM GUAR SEED MENTHAOIL PEPPER
Momentum Short Only
2006 SUGAR M GRADE 2 REF SOY OIL SOYBEAN PEPPER
2007 TURMERIC SUGAR M GRADE 2 MENTHAOIL GUAR GUM
2008 GUAR SEED MENTHAOIL MAIZE PEPPER
2009 GUAR GUM GUAR SEED PEPPER KAPAS
2010 CHANA CHILLI SOYBEAN PEPPER
2011 COTTON SEED OILCAKE CHANA GUAR SEED JEERA
2012 CARDAMOM TURMERIC CHILLI JEERA
Term Structure Long Only
2006 RAW JUTE MUSTARD SEED 2 REF SOY OIL SUGAR M GRADE 2
2007 URAD COTTON SEED OIL CAKE 2 WHEAT NEW WHEAT NEW
2008 COTTON SEED OIL CAKE 2 CHILLI POTATO SUGAR M GRADE 2
2009 CARDAMOM SOYBEAN MUSTARD SEED 2 KAPAS
2010 TURMERIC CARDAMOM REF SOY OIL SOYBEAN
2011 TURMERIC CARDAMOM GUR POTATO
2012 MENTHAOIL TURMERIC CHILLI KAPAS
Term Structure Short Only
2006 JEERA PEPPER GUAR GUM GUAR SEED
2007 JEERA TURMERIC CHILLI PEPPER
2008 CARDAMOM TURMERIC JEERA PEPPER
2009 SUGAR M GRADE GUAR SEED GUR JUTE
2010 CHANA SUGAR M GRADE GUR CHILLI
2011 CHANA JEERA PEPPER GUAR GUM
2012 CARDAMOM CHANA JEERA MUSTARD SEED
122
Momentum Long-Short
2006 Long Position URAD GUAR GUM RAW JUTE GUAR SEED
2006 Short Position SUGAR M GRADE 2 REF SOY OIL SOYBEAN PEPPER
2007 Long Position URAD CHANA PEPPER CARDAMOM
2007 Short Position TURMERIC SUGAR M GRADE 2 MENTHAOIL GUAR GUM
2008 Long Position COTTON SEED OIL CAKE 2 SOYBEAN KAPAS REF SOY OIL
2008 Short Position GUAR SEED MENTHAOIL MAIZE PEPPER
2009 Long Position MUSTARD SEED 2 SOYBEAN CARDAMOM GUR
2009 Short Position GUAR GUM GUAR SEED PEPPER KAPAS
2010 Long Position TURMERIC CARDAMOM GUAR SEED GUAR GUM
2010 Short Position CHANA CHILLI SOYBEAN PEPPER
2011 Long Position TURMERIC CARDAMOM MENTHAOIL PEPPER
2011 Short Position COTTON SEED OILCAKE CHANA GUAR SEED JEERA
2012 Long Position GUAR GUM GUAR SEED MENTHAOIL PEPPER
2012 Short Position CARDAMOM TURMERIC CHILLI JEERA
Term Structure Long-Short
2006 Long Position RAW JUTE MUSTARD SEED 2 REF SOY OIL SUGAR M GRADE 2
2006 Short Position JEERA PEPPER GUAR GUM GUAR SEED
2007 Long Position URAD COTTON SEED OIL CAKE 2 WHEAT NEW WHEAT NEW
2007 Short Position JEERA TURMERIC CHILLI PEPPER
2008 Long Position COTTON SEED OIL CAKE 2 CHILLI POTATO SUGAR M GRADE 2
2008 Short Position CARDAMOM TURMERIC JEERA PEPPER
2009 Long Position CARDAMOM SOYBEAN MUSTARD SEED 2 KAPAS
2009 Short Position SUGAR M GRADE GUAR SEED GUR JUTE
2010 Long Position TURMERIC CARDAMOM REF SOY OIL SOYBEAN
2010 Short Position CHANA SUGAR M GRADE GUR CHILLI
2011 Long Position TURMERIC CARDAMOM GUR POTATO
2011 Short Position CHANA JEERA PEPPER GUAR GUM
2012 Long Position MENTHAOIL TURMERIC CHILLI KAPAS
2012 Short Position CARDAMOM CHANA JEERA MUSTARD SEED
123
Appendix I1: Holding Period Returns of conventional portfolio, naïve portfolio, optimal portfolios and constrained portfolios.
2005 2006 2007 2008 2009 2010 2011 2012
Conventional portfolio a 32.65% 27.43% 42.28% -31.73% 62.46% 21.57% -11.31% 13.71%
Conventional portfolio b 27.90% 23.86% 34.75% -30.31% 54.22% 18.47% -10.55% 10.51%
Naïve Portfolio c 7.14% -0.86% -5.88% -19.14% 31.60% 17.62% 8.34% -1.49%
Optimal Portfolio
Strategic Asset Allocation 33.85% 10.17% 8.58% -5.47% 0.74% 11.69% 4.46% 6.93%
Momentum Long Only 23.72% -0.46% 0.08% -11.84% 2.01% 51.02% 7.92% 8.94%
Momentum Long Only (8) 18.81% 1.96% 4.86% -12.49% 6.52% 29.59% 15.05% 3.63%
Momentum Short Only 13.93% -3.05% 9.48% 9.44% -18.98% 13.54% -11.33% 8.35%
Momentum Short Only (8) 8.81% 4.00% 13.86% 3.39% -14.11% -3.35% -3.34% 4.87%
Momentum Long Short 18.81% -1.01% 4.91% -1.33% -9.01% 31.82% -1.75% 9.75%
Term Structure Long Only 17.20% -3.16% 21.65% -10.71% 7.93% 58.31% 9.49% 5.85%
Term Structure Long Only (8) 18.81% 5.95% 8.14% -14.91% 8.33% 42.07% 7.95% 5.57%
Term Structure Short Only 7.36% 3.99% 13.05% -3.19% -15.87% 17.97% 5.12% 11.04%
Term Structure Short Only (8) 8.81% 1.86% 23.53% -4.14% -10.17% 6.81% -13.14% 3.93%
Term Structure Long Short 12.26% 1.04% 18.53% -6.87% -4.59% 37.36% 8.05% 8.86%
Constrained Portfolio *
Strategic Asset Allocation 33.44% 25.46% 38.28% -29.69% 59.56% 23.34% -10.26% 13.26%
Momentum Long Only 31.97% 24.30% 37.96% -31.01% 60.07% 25.38% -9.51% 13.85%
Momentum Long Only (8) 31.14% 24.63% 38.70% -31.16% 62.53% 23.37% -8.81% 12.72%
Momentum Short Only 30.31% 23.97% 39.42% -26.48% 48.85% 21.68% -11.70% 13.35%
Momentum Short Only (8) 29.39% 25.05% 40.09% -27.63% 51.60% 19.69% -10.80% 12.84%
Momentum Long Short 31.14% 24.15% 38.69% -28.76% 54.37% 23.52% -10.61% 13.62%
Term Structure Long Only 30.89% 23.80% 41.16% -30.75% 62.98% 25.97% -9.27% 13.05%
Term Structure Long Only (8) 31.14% 25.25% 39.16% -31.71% 63.08% 24.51% -9.53% 12.88%
Term Structure Short Only 29.14% 25.19% 40.25% -28.99% 50.28% 22.16% -9.89% 13.68%
Term Structure Short Only (8) 29.39% 24.78% 41.53% -29.19% 53.55% 20.96% -11.94% 12.71%
Term Structure Long Short 30.02% 24.51% 40.72% -29.87% 56.53% 24.06% -9.57% 13.37%
Constrained Portfolio #
Strategic Asset Allocation 29.73% 22.25% 34.22% -24.18% 50.24% 20.63% -8.35% 12.58%
Momentum Long Only 28.30% 21.12% 33.20% -25.57% 50.72% 22.64% -7.57% 13.18%
Momentum Long Only (8) 27.49% 21.43% 33.92% -25.74% 53.02% 20.67% -6.87% 12.04%
Momentum Short Only 26.68% 20.76% 34.60% -20.82% 40.09% 19.01% -9.81% 12.66%
Momentum Short Only (8) 25.78% 21.81% 35.24% -22.06% 42.70% 17.06% -8.89% 12.16%
Momentum Long Short 27.49% 20.95% 33.90% -23.21% 45.32% 20.82% -8.69% 12.94%
Term Structure Long Only 27.24% 20.61% 36.29% -25.32% 53.48% 23.21% -7.33% 12.38%
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Term Structure Long Only (8) 27.49% 22.03% 34.36% -26.32% 53.58% 21.78% -7.60% 12.21%
Term Structure Short Only 25.54% 21.94% 35.39% -23.49% 41.49% 19.48% -7.97% 13.00%
Term Structure Short Only (8) 25.78% 21.54% 36.63% -23.70% 44.57% 18.31% -10.05% 12.03%
Term Structure Long Short 26.39% 21.29% 35.86% -24.40% 47.38% 21.34% -7.64% 12.69%
a Portfolio consist of 80 percent stocks and 20 percent bonds.
b Portfolio consist of 70 percent stocks and 30 percent bonds.
c Portfolio consists of most liquid (top 20) commodities selected on last year performance.
* Portfolio consists of 75 percent stocks, 15 percent bonds and 10 percent commodities.
# Portfolio consists of 65 percent stocks, 25 percent bonds and 10 percent commodities.
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Appendix I2: Holding Period Returns of conventional portfolio, naïve portfolio, optimal portfolios and constrained portfolios
(agricultural commodities).
2006 2007 2008 2009 2010 2011 2012
Conventional portfolio a 27.43% 42.28% -31.73% 62.46% 21.57% -11.31% 13.71%
Conventional portfolio b 23.86% 34.75% -30.31% 54.22% 18.47% -10.55% 10.51%
Naïve Portfolio c 0.76% -7.64% -6.42% 29.67% 33.52% 4.70% 0.83%
Optimal Portfolio
Strategic Asset Allocation 26.47% 12.48% -7.65% 5.72% 58.99% -9.97% 5.02%
Momentum Long Only 27.37% 0.52% -8.98% 19.05% 54.62% -19.57% 7.67%
Momentum Long Only (8) 11.87% 13.00% -8.02% 21.45% 38.88% -2.44% 0.30%
Momentum Short Only 6.14% 29.56% -0.65% -15.05% -1.79% -17.40% 1.15%
Momentum Short Only (8) 12.13% 24.03% -4.29% -9.97% -1.06% -10.24% -3.37%
Momentum Long Short 16.76% 14.55% -4.70% 1.03% 24.17% -18.01% 8.10%
Term Structure Long Only 8.52% 18.46% -10.72% 20.89% 61.54% -29.88% -10.01%
Term Structure Long Only (8) 13.24% 13.15% -9.31% 6.26% 46.24% -14.05% -0.51%
Term Structure Short Only 11.89% 16.30% -2.85% -13.36% 0.72% -23.56% -5.44%
Term Structure Short Only (8) 13.37% 26.35% -5.57% -18.03% 6.61% -19.46% -4.23%
Term Structure Long Short 10.60% 18.82% -6.72% 2.80% 28.33% -26.25% -5.86%
Constrained Portfolio *
Strategic Asset Allocation 27.77% 39.37% -30.08% 60.17% 28.13% -11.47% 13.17%
Momentum Long Only 27.97% 37.39% -30.38% 63.85% 27.57% -12.84% 13.85%
Momentum Long Only (8) 25.03% 39.51% -30.16% 64.53% 24.96% -10.44% 12.59%
Momentum Short Only 23.97% 41.89% -28.47% 53.95% 17.62% -12.45% 12.84%
Momentum Short Only (8) 25.15% 41.14% -29.20% 55.40% 17.71% -11.47% 12.05%
Momentum Long Short 25.97% 39.63% -29.42% 58.85% 22.52% -12.64% 13.40%
Term Structure Long Only 24.36% 40.40% -30.75% 64.19% 28.46% -14.42% 11.35%
Term Structure Long Only (8) 25.29% 39.44% -30.48% 60.22% 26.10% -12.00% 12.48%
Term Structure Short Only 25.19% 40.25% -28.91% 54.30% 18.19% -13.43% 11.77%
Term Structure Short Only (8) 25.42% 41.55% -29.49% 52.58% 19.27% -12.82% 11.91%
Term Structure Long Short 24.79% 40.35% -29.83% 59.19% 23.24% -13.92% 11.59%
Constrained Portfolio #
Strategic Asset Allocation 24.50% 34.56% -24.61% 50.81% 25.32% -9.57% 12.49%
Momentum Long Only 24.71% 32.65% -24.92% 54.30% 24.77% -10.97% 13.18%
Momentum Long Only (8) 21.82% 34.70% -24.69% 54.93% 22.22% -8.52% 11.91%
Momentum Short Only 20.76% 36.99% -22.94% 44.92% 15.02% -10.57% 12.16%
Momentum Short Only (8) 21.91% 36.27% -23.73% 46.31% 15.11% -9.57% 11.38%
Momentum Long Short 22.74% 34.81% -23.92% 49.56% 19.82% -10.76% 12.72%
126
Term Structure Long Only 21.16% 35.56% -25.32% 54.63% 25.64% -12.58% 10.68%
Term Structure Long Only (8) 22.07% 34.63% -25.02% 50.87% 23.33% -10.12% 11.80%
Term Structure Short Only 21.94% 35.39% -23.41% 45.27% 15.58% -11.56% 11.11%
Term Structure Short Only (8) 22.17% 36.66% -24.02% 43.67% 16.64% -10.94% 11.23%
Term Structure Long Short 21.56% 35.50% -24.36% 49.90% 20.53% -12.06% 10.92%
a Portfolio consist of 80 percent stocks and 20 percent bonds.
b Portfolio consist of 70 percent stocks and 30 percent bonds.
c Portfolio consists of most liquid (top 16)agricultural commodities selected on last year performance.
* Portfolio consists of 75 percent stocks, 15 percent bonds and 10 percent agricultural commodities.
# Portfolio consists of 65 percent stocks, 25 percent bonds and 10 percent agricultural commodities.
Appendix J: Criteria for selecting six commodities for forming inflation tracking portfolios
Different assets behave differently during inflation and high inflationary environments provide the context wherein the inflation
hedging potential of assets is revealed. The evidences of high inflationary environments are less and at the same time, assets may
behave differently during different inflationary regimes.
We started with top twenty most liquid commodities for analysis and later selected six commodities (one third of the top liquid
commodities to have a fair representation in commodity futures portfolio) that show best hedging potential based on absolute
correlation between realized inflation and futures returns. Results show that inclusion of these commodity futures in conventional
portfolios resulted in better risk-return tradeoff during high inflationary years. Such results were based on historical data and these
results might vary with the number of commodities included. However, from a historical perspective this study reveals the inflation
hedging potential of commodity futures. However, the real benefits can only be observed if the inflation and behavior of different
assets during inflation could be predicted well in advance. It is difficult to predict inflation and the behaviour of different assets during
inflation. In view of these uncertainties, hedging inflation perfectly for a long term is improbable. In such a scenario, dynamic hedging
of portfolios might be better in hedging against inflation.
