By Adrian Fernandez-Perez, Ph.D., Auckland University of Technology, New Zealand; Ana-Maria Fuertes, Ph.D., Cass Business School, City, University of London, U.K.; and Joëlle Miffre, Ph.D., Audencia Business School, Nantes, France
As summarized by Ana-Maria Fuertes, Ph.D., Professor in Finance and Econometrics, Cass Business School, City, University of London, U.K. and Member of the GCARD’s Editorial Advisory Board
This digest article summarizes a flexible investment framework that nests standalone styles and integrations thereof and can be applied in a long-short, long- or short-only fashion to any asset class in zero net supply. Motivated by the unsettled debate on how to best model commodity risk premia, the usefulness of integration is demonstrated in the context of a “universe” of eleven long-short commodity styles. The findings hold after trading costs, variants of the sophisticated integrations, sub-period analysis and data snooping tests.
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