Abstract

http://ssrn.com/abstract=1652699
 
 

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Should Investors Include Commodities in Their Portfolios After All? New Evidence


Charoula Daskalaki


University of Piraeus

George S. Skiadopoulos


University of Piraeus; Queen Mary, University of London, School of Economics and Finance; City University - Faculty of Finance - Cass Business School

November 26, 2011

Journal of Banking and Finance, Vol. 35, No. 10, 2011

Abstract:     
This paper investigates whether an investor is made better off by including commodities in a portfolio that consists of traditional asset classes. First, we revisit the posed question within an in-sample setting by employing mean–variance and non-mean–variance spanning tests. Then, we form optimal portfolios by taking into account the higher order moments of the portfolio returns distribution and evaluate their out-of-sample performance. Under the in-sample setting, we find that commodities are beneficial only to non-mean–variance investors. However, these benefits are not preserved out-of-sample. Our findings challenge the alleged diversification benefits of commodities and are robust across a number of performance evaluation measures, utility functions and datasets. The results hold even when transaction costs are considered and across various sub-periods. Not surprisingly, the only exception appears over the 2005–2008 unprecedented commodity boom period.

Number of Pages in PDF File: 56

Keywords: Asset allocation, Commodity boom, Commodity futures, Commodity indexes. Spanning, Performance evaluation

JEL Classification: G10, G11, G12

Accepted Paper Series


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Date posted: August 5, 2010 ; Last revised: November 27, 2011

Suggested Citation

Daskalaki, Charoula and Skiadopoulos, George S., Should Investors Include Commodities in Their Portfolios After All? New Evidence (November 26, 2011). Journal of Banking and Finance, Vol. 35, No. 10, 2011. Available at SSRN: http://ssrn.com/abstract=1652699

Contact Information

Charoula Daskalaki
University of Piraeus ( email )
Karaoli and Dimitriou 80
80 KARAOLI & DIMITRIOU STREET
Piraeus, Attiki 18534
Greece
George Skiadopoulos (Contact Author)
University of Piraeus ( email )
80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece
HOME PAGE: http://web.xrh.unipi.gr/faculty/gskiadopoulos/
Queen Mary, University of London, School of Economics and Finance
Lincoln's Inn Fields
Mile End Rd.
London, E1 4NS
United Kingdom
City University - Faculty of Finance - Cass Business School ( email )
London, EC2Y 8HB
Great Britain
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