The effectiveness of adding commodities to a multi-asset portfolio

• Autor(a) principal: Galhardas, Carlota Rendeiro
• Data de Publicação: 2021
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.14/35249
• topic: Portfolio development; Asset allocation modelling; Commodity investment; Stock-bond portfolio; Static portfolio allocation; Dynamic portfolio allocation; Construção de portfólios; Modelagem da alocação de ativos; Investimento em commodities; Portfólio de ações e obrigações; Alocação estática; Alocação dinâmica; Domínio/Área Científica::Ciências Sociais::Economia e Gestão

Commodity investment is fundamentally motivated by a desire to improve the performance of portfolios composed of stocks and bonds. Throughout this paper we analyze the out-of-sample performance effects derived from including commodities in a stock-bond portfolio for seven distinct asset allocation models – equally and strategically weighted portfolios, risk-parity, reward-to-risk timing, as well as, minimum-variance, mean-variance, and Black-Litterman. We analyze seven commodity groups and consider two distinct investor profiles, while constructing portfolios in which commodities are picked in a consistent standard format, and portfolios in which commodities are dynamically picked and adjusted every month. Precious metals emerge from our static portfolio allocation analysis as the commodity group with the clearest and most significant portfolio benefits. Concurrently, dynamic portfolio allocation yields very appealing returns, performing well in terms of risk-return tradeoff measures, while delivering more consistent results across asset allocation models when compared to static allocation. Portfolio gains remain highly linked to the macroeconomic environment, demonstrating that investments in industrial metals generate considerable improvements for favorable subperiods of stability and growth, whereas precious metals are particularly beneficial in the face of unstable subperiods.