Assessing efficiency and investment opportunities in commodities: A time series and portfolio simulations approach
Fredj Jawadi (),
Zied Ftiti () and
Economic Modelling, 2017, vol. 64, issue C, 567-588
This paper investigates the informational efficiency hypothesis in the short and long term for four major commodity markets (oil, gas, electricity, and coal) from January 1997 to January 2016. Unlike previous studies, we provide a more concise comparative analysis by focusing on different classes of commodities for a large sample, including 5 developed and 3 emerging regions and covering 46 countries. We apply different parametric and non-parametric econometric tests. Our study provides two interesting findings. First, we show that commodity markets are informationally inefficient in the short term. Our portfolio simulations highlight that commodities might provide “good” investment opportunities, but those opportunities vary according to commodity class and regions. Second, we show that most commodity markets become informationally efficient in the long term, thereby reducing investors' interest for the duration. Thus, commodity markets might be used to hedge investor’s portfolios, particularly for speculators and chartists in the short term, while these investments might not be appealing in these markets in the long term.
Keywords: C10; G14; Informational efficiency; Commodity markets; Hedging; Portfolio simulations; Time series (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:64:y:2017:i:c:p:567-588
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