How do returns on commodity futures compare with returns on common stocks? The authors found that, over the period 1950 to 1976, the mean return on their benchmark portfolio of commodity futures was about the same as the mean return on common stocks. On the other hand, the futures tended to do well in years when the stocks were doing badly, and vice versa. By switching from an all-stock portfolio to one invested 60 per cent in stocks and 40 per cent in futures, an investor could have reduced his return variability by one-third without sacrificing any of his return.

Furthermore, the commodity futures proved to be very good inflation hedges. Four of their best years coincided with four of the seven years of the highest acceleration in inflation. While the dispersion of the real returns on the commodity futures portfolio was smaller than the dispersion of its nominal returns, the reverse was true for both stocks and bonds.

The mean rates of return and variabilities of the 23 individual commodities in the authors’ sample were distributed over a wide range. But only one commodity—eggs — had a negative rate of return for the 27-year period. Hardly any of the individual commodities (other than the obvious cases such as hogs and pork bellies) showed significant correlation with each other.