Strategic Allocation to Commodity Factor Premiums
Robeco Asset Management - Quantitative Strategies
Wilma De Groot
Robeco Asset Management
May 16, 2013
In this study we confirm the existence of sizable momentum, carry and low-volatility factor premiums in the commodity market, and argue that investors should consider these commodity factor premiums when determining their strategic asset allocation. We find that diversified portfolios of commodity factor premiums exhibits a significantly better risk-adjusted performance than the commodity market portfolio and adds significant value to a conventional stock/bond portfolio. The traditional commodity market portfolio, on the other hand, appears to deserve little or no role at all in the strategic asset mix. Investors should therefore not postpone the consideration of alternative commodity factor premiums to a later stage of the investment process.
Number of Pages in PDF File: 26
Keywords: commodities, factor premiums, strategic asset allocation, momentum, carry, low-volatility
JEL Classification: G12, G13, E44, Q11, Q41, Q14
Date posted: May 17, 2013 ; Last revised: May 27, 2014
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