By Charoula Daskalaki, Department of Banking and Financial Management, University of Piraeus, Greece; George Skiadopoulos, Department of Banking and Financial Management, University of Piraeus, Greece, and School of Economics and Finance, Queen Mary, University of London; and Nikolas Topaloglou, Department of International and European Economic Studies, Athens University of Economics and Business, Greece
As summarized by Ana-Maria Fuertes, Professor in Finance and Econometrics, Cass Business School, City, University of London, U.K. and Member of the GCARD’s Editorial Advisory Board
This paper revisits the question of whether it is worthwhile for investors to include commodities in their equity and bond portfolios. In studying this question, the authors use a statistical methodology that circumvents the need to make assumptions on investors’ preferences and the distribution of asset returns. The authors find in both in-sample and out-of-sample tests that commodities provide diversification benefits, especially, for second- and third-generation commodity indices. Of note, the authors of the comprehensive article were recipients of a Commodities Research Fellowship Award at the J.P. Morgan Center for Commodities. This fellowship, in turn, was generously funded by the CME Group Foundation.