Handbook of Commodity Investing


The shift in the balance of economic growth from the developed world to the developing world shows no sign of reversal. For the first time in history, more people live in cities than in the countryside, and their material needs have led to an acceleration in demand for metals, energy, and food. The supply side has been slow to react fully to this change, and as a result, many commodities have reached "tipping points," flipping from surpluses into shortages—and it appears likely that the current period of elevated...

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The shift in the balance of economic growth from the developed world to the developing world shows no sign of reversal. For the first time in history, more people live in cities than in the countryside, and their material needs have led to an acceleration in demand for metals, energy, and food. The supply side has been slow to react fully to this change, and as a result, many commodities have reached "tipping points," flipping from surpluses into shortages—and it appears likely that the current period of elevated commodity prices will be prolonged.

The Handbook of Commodity Investing provides the information necessary for investors to understand and successfully incorporate commodities into their portfolios. Filled with a comprehensive collection of information from experts in the commodity investment industry, this detailed guide explains the mechanics of the commodity market, performance measurement, risk management, asset allocation, and the different commodity products, including special classes of assets.

Editors Frank Fabozzi, Roland Füss, and Dieter Kaiser begin with a primer on the basics of commodity investing, offering insight into market participants, commodity sectors, commodity exchanges, return components of commodity futures, and the risk and performance characteristics of the sectors. They provide information on the all-important topic of risk management for commodity investments, outlining seven key principles for effective risk management of commodity futures portfolios. And they offer specific advice on how commodity products can be implemented within an investor's asset allocation, demonstrating how to efficiently design a commodity futures trading program, use hedge funds, and more.

In addition to providing an overview of the various commodity products currently available to investors, the editors offer more detailed information on some of the most important commodity sectors, including commodity market fundamentals for grain, cattle, and hogs; gold and silver; electricity and emissions trading in the European Union; and other key sectors.

An invaluable guide for individuals, institutional investors, and academics, The Handbook of Commodity Investing will show you how to successfully include commodities in a portfolio and provide you with the insights needed to fully understand the fundamentals of this volatile—and highly profitable—market.

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Editorial Reviews

From the Publisher
"Anyone interested in commodities as an investment and just wants the pure facts (no hype) should find The Handbook of Commodity Investing very beneficial." (About.com: Commodities)

"Fabozzi is by far the best-selling author when it comes to financial mathematics for practitioners." (Publishing News, Friday 14th March 2008)

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Product Details

  • ISBN-13: 9780470117644
  • Publisher: Wiley
  • Publication date: 7/7/2008
  • Series: Frank J. Fabozzi Series, #156
  • Edition number: 1
  • Pages: 986
  • Product dimensions: 6.10 (w) x 9.10 (h) x 2.20 (d)

Meet the Author

Frank J. Fabozzi, PhD, CFA, is Professor in the Practice of Finance and Becton Fellow at Yale University's School of Management and the Editor of the Journal of Portfolio Management.

Roland Fuss, PhD, is Professor of the Endowed Chair for Asset Management, European Business School (EBS), International University Schloss Reichartshausen, Germany.

Dieter G. Kaiser, PhD, is Director of Alternative Investments at Feri Institutional Advisors GmbH in Bad Homburg, Germany, where he is managing a dedicated commodities fund of hedge funds.

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Table of Contents



About the Editors.

Contributing Authors.

PART ONE: Mechanics of the Commodity Market.

CHAPTER 1: A Primer on Commodity Investing (Frank J. Fabozzi, Roland Füss, and Dieter G. Kaiser).

CHAPTER 2: The Pricing and Economics of Commodity Futures (Mark J. P. Anson).

CHAPTER 3: Commodity Futures Investments: A Review of Strategic Motivations and Tactical Opportunities (Joshua D. Woodard).

CHAPTER 4: Macroeconomic Determinants of Commodity Futures Returns (Zeno Adams, Roland Fuss, and Dieter G. Kaiser).

CHAPTER 5: The Relationship Between Risk Premium and Convenience Yield Models (Viola Markert and Heinz Zimmermann).

CHAPTER 6: The Optimal Rotation Period of Renewable Resources: Theoretical Evidence from the Timber Sector (Dr. Fritz Helmedag).

PART TWO: Performance Measurement.

CHAPTER 7: Review of Commodity Futures Performance Benchmarks (Roland Füss, Christian Hoppe, and Dieter G. Kaiser).

CHAPTER 8: Performance Characteristics of Commodity Futures (Claude Erb, Campbell R. Harvey, and Christian Kempe).

CHAPTER 9: Statistical Analysis of Commodity Futures Returns (Reinhold Hafner and Maria Heiden).

CHAPTER 10: The Diversification Benefits of Commodity Futures Indexes: A Mean-Variance Spanning Test (Bernd Scherer and Li He).

CHAPTER 11: CTA/Managed Futures Strategy Benchmarks: Performance and Review (Thomas Schneeweis, Raj Gupta, and Jason Remillard).

PART THREE: Risk Management.

CHAPTER 12: Some Thoughts on Risk Management for Commodity Portfolios (Jeffrey M. Christian).

CHAPTER 13: Effective Risk Management Strategies for Commodity Portfolios (Moazzam Khoja).

CHAPTER 14: Quantifying Cross-Commodity Risk in Portfolios of Futures Contracts (Ted Kury).

CHAPTER 15: Incorporating Futures in Commodity Price Forecasts (Chakriya Bowman and Aasim M. Husain).

PART FOUR: Asset Allocation.

CHAPTER 16: Commodity Trading Strategies: Examples of Trading Rules and Signals from the CTA Sector (François-Serge Lhabitant).

CHAPTER 17: How to Design a Commodity Futures Trading Program (Hilary Till and Joseph Eagleeye).

CHAPTER 18: Sources of Alpha in Commodity Investing (Markus Mezger).

CHAPTER 19: Efficient Frontier of Commodity Portfolios (Juliane Proelss and Denis Schweizer).

CHAPTER 20: Active Management of Commodity Investments: The Role of CTAs and Hedge Funds (R. McFall Lamm, Jr.).

CHAPTER 21: Introducing Alternative Investments in a Traditional Portfolio: The Case of Commodities, Hedge Funds, and Managed Futures (Mark S. Shore).

CHAPTER 22: Strategic and Tactical Allocation to Commodities for Retirement Savings Schemes (Theo E. Nijman and Laurens A. P. Swinkels).

PART FIVE: Commodity Products.

CHAPTER 23: Types of Commodity Investments (Lynne Engelke and Jack C. Yuen).

CHAPTER 24: Commodity Options (Carol Alexander and Aanand Venkatramanan).

CHAPTER 25: The Pricing of Electricity Forwards (Dr. Matthias Muck and Markus Rudolf).

CHAPTER 26: Securitization of Commodity Price Risk (Paul U. Ali).

CHAPTER 27: Commodity Trading Advisors: A Review of Historical Performance (Martin Eling).

CHAPTER 28: Catching Future Stars Among Micro-CTAs (Greg N. Gregoriou and Fabrice Douglas Rouah).

CHAPTER 29: A Primer on Energy Hedge Funds (Oliver Engelen and Dieter G. Kaiser).

PART SIX: Special Classes.

CHAPTER 30: An Overview of Commodity Sectors (Roland Eller and Christian Sagerer).

CHAPTER 31: A Practical Guide to Gold as an Investment Asset (Charlie X. Cai, lain Clacher, Robert Faff, and David Hillier).

CHAPTER 32: The Effect of Gold in a Traditional Portfolio (Thomas Heidorn and Nadeshda Demidova-Menzel).

Chapter 33: Fundamental Analysis of the World Silver Market (Jeffrey M. Christian).

CHAPTER 34: Investing in Base Metals (Michael Killick).

CHAPTER 35: Electricity Trading in the European Union (Stefan Ulreich).

CHAPTER 36: The Natural Gas Market in the United Kingdom (Chris Harris).

CHAPTER 37: Emissions Trading in the European Union (Stefan Ulreich).

CHAPTER 38: The Fundamentals of Agricultural and Livestock Commodities (Ronald C. Spurga).

CHAPTER 39: Fundamental Analysis of the World Sugar Market (Rohit Savant).

PART SEVEN: Technical Analysis.

CHAPTER 40: The Profitability of Technical Analysis in Commodity Markets (Cheol-Ho Park and Scott H. Irwin).


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