Abstract

http://ssrn.com/abstract=1920454
 
 

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The Case for Long-Short Commodity Investing: Performance, Volatility and Diversification Benefits


Joelle Miffre


EDHEC Business School

Adrián Fernández-Pérez


Auckland University of Technology

September 5, 2012


Abstract:     
The paper studies the performance and volatility of long-only and long-short commodity portfolios and their conditional correlations with stocks and bonds. We present strong evidence in favor of long-short (as opposed to long-only) commodity investments. Long-short portfolios (based on momentum, term structure or hedging pressure) are found to present better performance, lower volatility and lower correlation with stocks than their long-only counterparts. Long-short hedging pressure portfolios stand further out as they present decreasing correlations with the S&P500 index in periods of heightened volatility in equity markets: unlike long-only commodity portfolios, they thus serve as partial hedge against extreme equity risk.

Number of Pages in PDF File: 37

Keywords: Commodity futures, Conditional volatility, Conditional correlation, Long-short portfolios, Professional money managers, Financialization

JEL Classification: G11, G13

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Date posted: September 1, 2011 ; Last revised: September 11, 2012

Suggested Citation

Miffre, Joelle and Fernández-Pérez, Adrián, The Case for Long-Short Commodity Investing: Performance, Volatility and Diversification Benefits (September 5, 2012). Available at SSRN: http://ssrn.com/abstract=1920454 or http://dx.doi.org/10.2139/ssrn.1920454

Contact Information

Joelle Miffre (Contact Author)
EDHEC Business School ( email )
58 rue du Port
Lille, 59046
France
Adrián Fernández-Pérez
Auckland University of Technology ( email )
AUT City Campus
Private Bag 92006
Auckland, 1142
New Zealand
+64 9 921 9999 (Phone)
+64 9 921 9940 (Fax)
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