Risk management insights from Markowitz optimization for constructing portfolios with commodity futures

D Sykes Wilford ()
Additional contact information
D Sykes Wilford: The Citadel

Journal of Financial Perspectives, 2014, vol. 2, issue 2, 141-150

Abstract: Based upon a Markowitz methodology, this paper considers use of commodities futures as assets to enhance portfolio diversification. A very simplistic methodological approach is chosen to allow various portfolio issues to be highlighted with data from the recent financial crisis. Naïve long-only diversification (with commodities) does not add a great deal of value relative to the event risk that can (and often does) occur. The opposite is concluded for the long/short approach. We find commodities can be key drivers in risk mitigation over time and in crisis conditions when utilized in long/short portfolios. Focus upon crisis risk exposes many of the fallacies inherent to simplistic portfolio creation and management.

Keywords: Commodity Risk; Portfolio Theory; Portfolio Risk; Risk Management; Asset Allocation; Markowitz Optimization (search for similar items in EconPapers)
JEL-codes: G10 G11 G12 (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (2)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:ris:jofipe:0055

Access Statistics for this article

Journal of Financial Perspectives is currently edited by Ms Alina Stefan

More articles in Journal of Financial Perspectives from EY Global FS Institute 1 More London Place, London SE1 2AF, UK.
Bibliographic data for series maintained by Ms Alina Stefan ( this e-mail address is bad, please contact ).