Is Managed Futures an Asset Class? The Search for the Beta of Commodity Futures THIS PAGE LEFT BLANK FOR FORMATTING PURPOSES Is Managed Futures an Asset Class? The Search for the Beta of Commodity Futures

Abstract This paper investigates potential sources of return to speculators in the commodity futures market. Initially, we focus on the "classic arbitrage model" based on the theories of Keynes (1930), Kaldor (1939), Our research indicates that these models have inherent shortcomings in being able to pinpoint a definitive source of structural risk premium within the complexity of the commodity futures markets. We hypothesize that the classic arbitrage pricing theory contains circular logic, and as a consequence, its natural state is disequilibrium, not equilibrium. We extend this hypothesis to suggest that the term structure of the futures price curve, while indicative of a potential roll return benefit, in fact implies a complex series of roll yield permutations. Similarly, the hedging response function elicits a behavioral risk management mechanism, and therefore, corroborates social reflexivity. Such models are inter-related and each reflects certain qualities and dynamics within the overall futures market paradigm. With respect to managed futures, it is an observable materialization of behavioral finance, where risk, return, leverage and skill operate un-tethered from the anchor of an accurate representation of beta. In other words, it defies rational expectations equilibrium, the efficient market hypothesis and allied models-the CAPM, arbitrage pricing theory or otherwise-to singlehandedly isolate a persistent source of return without that source eventually slipping away