Volatility and correlation timing: The role of commodities

Panos Pouliasis and Nikos Papapostolou ()

Journal of Futures Markets, 2018, vol. 38, issue 11, 1407-1439

Abstract: This paper examines the role of commodities from the perspective of dynamic asset allocation. We model conditional second moments of stock, bond, and commodity futures and examine their impact on the portfolio choice decision of a risk‐averse investor in a mean‐variance framework. Findings suggest that adding commodities in the opportunity set enhances portfolio risk‐return characteristics and offers diversification benefits. Moreover, there is substantial economic value in both volatility and correlation timing strategies. Results are robust across various subperiods and rebalancing strategies: alternative correlation dynamics specifications, short‐sale constraints, and transaction costs under both in‐ and out‐of‐sample settings.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://doi.org/10.1002/fut.21939

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:wly:jfutmk:v:38:y:2018:i:11:p:1407-1439

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().