Historical Performance of Commodity and Stock Markets

Hector O. Zapata, Joshua Detre and Tatsuya Hanabuchi

Journal of Agricultural and Applied Economics, 2012, vol. 44, issue 3, 339-357

Abstract: This paper examines two interrelated issues in commodity markets, namely, the cyclical relationship between stocks and commodities and the function of commodity and agribusiness indexes in portfolios. A high negative correlation has existed between stock and commodity prices over the past 140 years. Moreover, the two markets have alternated in price leadership with 29-32-year cycles. The recent price dominance in agricultural commodities started in 2000, a result supported by the empirical results of the portfolio allocation analysis. For a risk-averse investor, irrespective of the period analyzed, placing funds in agribusiness and/or agricultural commodity indexes was sound investing.

Date: 2012
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