Profs. Gorton and Rouwenhorst Discuss Their Seminal Commodity Futures Study in the Financial Times

K. Geert Rouwenhorst, Professor of Finance and Deputy Director of the International Center for Finance at Yale SOM, and Gary Gorton, the Frederick Frank Class of 1954 Professor of Management and Finance, recently sat for an interview with Financial Times reporter Gregory Meyer to discuss their seminal paper “Facts and Fantasies About Commodity Futures” and how its theories apply in the current market. Published in 2006, the study examined the performance of commodities over 45 years and found that commodities provide returns as high as stocks while offering relatively low historical risk, as well as a diversification benefit because their returns are negatively correlated with those of stocks and bonds. Since its publication, the paper has influenced the strategies of institutional investors. “The paper’s view was embraced en masse by institutional investors and helped to transform commodities from a niche investment into a proper standalone asset class,” wrote Meyer.