Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/246311 
Year of Publication: 
2020
Series/Report no.: 
Working Paper No. 2021
Publisher: 
Johannes Kepler University of Linz, Department of Economics, Linz
Abstract: 
Using the S&P GSCI and its five component sub-indices, we show that considering each commodity separately yields nontrivial hedging gains in and out of sample. During 1999-2019, the maximum Sharpe ratio portfolio assigns positive weights to the GSCI Energy, Industrial and Precious Metals, whereas only precious metals enter the optimal portfolio after the financial crisis. In out-of-sample optimizations based on dynamic conditional correlations, a subset of commodity futures excluding the GSCI Agriculture and Livestock outperforms conventional stock-bond portfolios with and without the overall GSCI. We argue that the "normal backwardation" in commodity markets has broken down during our sample period.
Subjects: 
Commodity futures
Diversification
Hedging
Financial crisis
Normal backwardation
JEL: 
C58
G11
G17
Q02
Document Type: 
Working Paper

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