Strategic Allocation to Commodity Factor Premiums

26 Pages Posted: 17 May 2013 Last revised: 27 May 2014

David Blitz

Robeco Asset Management - Quantitative Strategies

Wilma de Groot

Robeco Asset Management

Multiple version iconThere are 2 versions of this paper

Date Written: May 16, 2013

Abstract

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.

Keywords: commodities, factor premiums, strategic asset allocation, momentum, carry, low-volatility

JEL Classification: G12, G13, E44, Q11, Q41, Q14

Suggested Citation

Blitz, David and de Groot, Wilma, Strategic Allocation to Commodity Factor Premiums (May 16, 2013). Available at SSRN: https://ssrn.com/abstract=2265901 or http://dx.doi.org/10.2139/ssrn.2265901

David Blitz

Robeco Asset Management - Quantitative Strategies ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

Wilma De Groot (Contact Author)

Robeco Asset Management ( email )

Rotterdam, 3011 AG
Netherlands
+31 10 224 3107 (Phone)

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