Do commodity factors work as inflation hedges and safe havens?

This study investigates whether commodity futures factor portfolios work as hedges and safe havens against inflation shocks. We observe that momentum, basis momentum, and a combination of factor portfolios act as strong hedges against core inflation shocks, suggesting that holding the factor portfolios generates not only higher Sharpe ratios but also strong hedge effects against inflation. Moreover, the momentum, basis momentum, and value portfolios have weak safe haven properties against inflation shocks. In addition, our empirical results suggest that hedge effects for commodity future portfolios are stronger during the pre-financialization period.