Measuring the hedging effectiveness of commodities

Pornchai Chunhachinda, Maria E. de Boyrie and Ivelina Pavlova

Finance Research Letters, 2019, vol. 30, issue C, 201-207

Abstract: Our study examines the dynamic correlations, portfolio weights and hedging effectiveness of adding commodities to international equity portfolios. The data covers the 2014/2015 commodities price crash. We compare commodities as a hedge for developed, emerging and frontier equities. Based on a DCC-GARCH framework, we show that forming hedged portfolios, including emerging, rather than developed and frontier market equities and commodities, has better hedging effectiveness in terms of risk reduction. When risk-adjusted returns are considered, developed markets and commodities provide a better investment performance.

Keywords: Commodities; Equities; Hedging effectiveness; DCC (search for similar items in EconPapers)
JEL-codes: F30 G11 G15 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S154461231830535X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:30:y:2019:i:c:p:201-207

DOI: 10.1016/j.frl.2018.09.012

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().