Commodities, Crude Oil, and Diversified Portfolios

Abstract

With concerns on inflation flaring up, there has been renewed interest in potentially including commodities in diversified portfolios. This article builds off prior research in examining which commodities to include and in what size. The article briefly reviews the relevant literature and proposes a novel and uncomplicated portfolio solution, which takes into consideration both historical results and plausible new paradigms. In addition, an investor would be able to implement this portfolio solution through deeply liquid futures markets.

Keywords: commodities, crude oil, diversification, futures contracts

JEL Classification: G1, G11