Commodity Futures: A Japanese Perspective*

We study the basic properties of an equally weighted index of U.S. commodities futures from the perspective of a Japanese investor. We find that the returns on the U.S. equally-weighted commodity futures index maintain their basic properties documented in Gorton and Rousenhorst (2005), when translated into Yen. In particular, looking at returns on Japanese stocks and bonds, the commodity futures index, translated into Yen, continues to display equity-like returns, but with slightly less volatility. In addition, the Yen-based commodity futures returns show essentially zero correlation with Japanese equities and negative correlation with bonds. * We thank Dimitry Gupalo for research assistance, and AIG Financial Products and the QGroup for financial support. Thanks to Kelley Kirklin for suggestions on the return calculation. We also thank Shigeyuki Hamori, Kenji Wada, and Nobuyoshi Yamori for their guide to the Japanese literature.