This paper examines the properties of commodity futures as an asset class by constructing an equally-weighted index of monthly commodity futures returns from July 1959 to March 2004. The study finds that commodity futures have historically offered similar returns and Sharpe ratios to equities. While the risk premium on commodity futures is comparable to equities, their returns are negatively correlated with equity and bond returns, and positively correlated with inflation and unexpected inflation. The negative correlation with other asset classes is largely due to differing behavior during business cycles. Commodity futures are also positively correlated with inflation and changes in expected inflation. The paper also shows that commodity futures have outperformed long-term government bonds in the UK and Japan, and that their performance is similar to equities in both countries. The study concludes that commodity futures can provide diversification benefits and hedge against inflation. The paper also finds that commodity futures have a positive basis, which can be used to generate returns through a trading strategy. The study further shows that commodity futures have outperformed equities during recessions and underperformed during expansions. The paper also finds that commodity futures have a higher Sharpe ratio than equities, indicating better risk-adjusted returns. The study concludes that commodity futures are a valuable asset class that can provide diversification and hedge against inflation.This paper examines the properties of commodity futures as an asset class by constructing an equally-weighted index of monthly commodity futures returns from July 1959 to March 2004. The study finds that commodity futures have historically offered similar returns and Sharpe ratios to equities. While the risk premium on commodity futures is comparable to equities, their returns are negatively correlated with equity and bond returns, and positively correlated with inflation and unexpected inflation. The negative correlation with other asset classes is largely due to differing behavior during business cycles. Commodity futures are also positively correlated with inflation and changes in expected inflation. The paper also shows that commodity futures have outperformed long-term government bonds in the UK and Japan, and that their performance is similar to equities in both countries. The study concludes that commodity futures can provide diversification benefits and hedge against inflation. The paper also finds that commodity futures have a positive basis, which can be used to generate returns through a trading strategy. The study further shows that commodity futures have outperformed equities during recessions and underperformed during expansions. The paper also finds that commodity futures have a higher Sharpe ratio than equities, indicating better risk-adjusted returns. The study concludes that commodity futures are a valuable asset class that can provide diversification and hedge against inflation.