Strategic Asset Allocation and Intertemporal Hedging Demands: With Commodities as an Asset Class

34 Pages Posted: 1 Nov 2010 Last revised: 2 Sep 2011

See all articles by Yongyang Su

Yongyang Su

Suffolk University - Department of Economics

Chi Keung Marco Lau

Teesside University

Date Written: October 1, 2010

Abstract

This paper analyzes the role of commodities in the process of strategic asset allocation, with an attempt of computing the weight of commodities relative to traditional assets in a multi-period portfolio choice problem and understanding the economic interpretations to its importance. We find U.S. investors have a significantly stable intertemporal hedging demand for commodities in the long horizons, even when they have access to foreign equity markets, for example, foreign stock market. Our results provide support to institutional investors attempting to include commodities into their strategic asset allocation decision.

Keywords: Strategic asset allocation, portfolio choice, commodities, commodity futures, hedging demand

JEL Classification: G11, G13

Suggested Citation

Su, Yongyang and Lau, Chi Keung Marco, Strategic Asset Allocation and Intertemporal Hedging Demands: With Commodities as an Asset Class (October 1, 2010). Available at SSRN: https://ssrn.com/abstract=1700726 or http://dx.doi.org/10.2139/ssrn.1700726

Yongyang Su (Contact Author)

Suffolk University - Department of Economics ( email )

8 Ashburton Place
Boston, MA 02108
United States

Chi Keung Marco Lau

Teesside University ( email )

Tees Valley
Middlesbrough
Middlesbrough, Middlesbrough TS1 3BX
United Kingdom

HOME PAGE: http://https://research.tees.ac.uk/en/persons/chi-lau