Commodity Investing

ADAM DUNSBY is a principal at Cornerstone Quantitative Investment Group. He received both his undergraduate degree and PhD in finance from the Wharton School of the University of Pennsylvania. JOHN ECKSTEIN is a principal at Cornerstone Quantitative Investment Group. He earned a BS from Brown University, where he studied computer science and cognitive science. Mr. Eckstein developed investment application software for money management firms prior to his current position. JESS GASPAR is the Director of Research at Cornerstone Quantitative Investment Group. He earned his undergraduate degree from MIT and his PhD in economics from Stanford. After receiving his PhD, Mr. Gaspar was an assistant professor at the University of Chicago, where he did research and taught international economics and computational methods in economics and finance. Mr. Gaspar worked at McKinsey & Co. as a consultant before joining Cornerstone. SARAH MULHOLLAND is the head trader at Cornerstone Quantitative Investment Group. She earned a BS in economics from the Wharton School of the University of Pennsylvania. Prior to joining Cornerstone, she traded energy derivatives for Enron North America and PSE&G.

• Acknowledgments ixPART ONE Basics 1CHAPTER 1 Introduction 3CHAPTER 2 Commodity Futures as Investments 9CHAPTER 3 Commodities for the Long Run 29PART TWO Understanding Energy 37CHAPTER 4 Crude Oil 39CHAPTER 5 Heating Oil 57CHAPTER 6 Gasoline 67CHAPTER 7 Natural Gas 79PART THREE Understanding Grains and Oilseeds 93CHAPTER 8 Corn 95CHAPTER 9 Wheat 107CHAPTER 10 Soybeans 117PART FOUR Understanding Livestock 131CHAPTER 11 Hogs 133CHAPTER 12 Cattle 141PART FIVE Understanding Industrial Metals 151CHAPTER 13 Copper 153CHAPTER 14 Aluminum 165CHAPTER 15 Zinc 177PART SIX Understanding the Softs 187CHAPTER 16 Coffee 189CHAPTER 17 Sugar 197CHAPTER 18 Cocoa 207CHAPTER 19 Cotton 213PART SEVEN How to Invest 221CHAPTER 20 Some Building Blocks of a Commodity Futures Trading System 223CHAPTER 21 The Rise of the Indexes 245CHAPTER 22 Conclusion 265APPENDIX The London Metal Exchange 269Notes 273References 283About the Authors 287Index 289