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Should investors include commodities in their portfolios after all? New evidence
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Daskalaki, Charoula and Skiadopoulos, George (2011) Should investors include commodities in their portfolios after all? New evidence. Journal of Banking & Finance, Vol.35 (No.10). pp. 2606-2626. doi:10.1016/j.jbankfin.2011.02.022 ISSN 0378-4266.
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Official URL: http://dx.doi.org/10.1016/j.jbankfin.2011.02.022
Abstract
This paper investigates whether an investor is made better off by including commodities in a portfolio that consists of traditional asset classes. First, we revisit the posed question within an in-sample setting by employing mean-variance and non-mean-variance spanning tests. Then, we form optimal portfolios by taking into account the higher order moments of the portfolio returns distribution and evaluate their out-of-sample performance. Under the in-sample setting, we find that commodities are beneficial only to non-mean-variance investors. However, these benefits are not preserved out-of-sample. Our findings challenge the alleged diversification benefits of commodities and are robust across a number of performance evaluation measures, utility functions and datasets. The results hold even when transaction costs are considered and across various sub-periods. Not surprisingly, the only exception appears over the 2005-2008 unprecedented commodity boom period.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HF Commerce H Social Sciences > HG Finance |
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Divisions: | Faculty of Social Sciences > Warwick Business School | ||||
Library of Congress Subject Headings (LCSH): | Asset allocation, Commodity futures, Capitalists and financiers | ||||
Journal or Publication Title: | Journal of Banking & Finance | ||||
Publisher: | Elsevier Science BV | ||||
ISSN: | 0378-4266 | ||||
Official Date: | October 2011 | ||||
Dates: |
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Volume: | Vol.35 | ||||
Number: | No.10 | ||||
Page Range: | pp. 2606-2626 | ||||
DOI: | 10.1016/j.jbankfin.2011.02.022 | ||||
Status: | Peer Reviewed | ||||
Publication Status: | Published |
Data sourced from Thomson Reuters' Web of Knowledge
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