Commodity Futures Indices and Traditional Asset Markets in I DCC Evidence for Portfolio Diversification Benefits / Lages
By: Lagesh, M A
Material type:
ArticlePublisher: 2014Description: 777 - 793Subject(s): Dcc-Garch Model | Correlation | Traditional Assets | Commodity Futures Indices
In:
Global Business ReviewSummary: This article investigates the potential for portfolio diversification benefits of commodity futures in the Indian context. For this purpose, we have estimated dynamic conditional correlations (DCC) between returns of four commodity futures indices and traditional asset class indices such as stock index, long-term bond index and Treasury bill index, separately for the pre-crisis and crisis period using the DCC-GARCH model and daily data ranging from June 2005 to September 2011. Empirical results reveal that there exist very low dynamic conditional correlations between commodity futures indices returns and traditional asset indices returns, an evidence illustrating the potential for portfolio diversification benefits of commodity futures. Commodity futures become more segmented from the traditional asset market; thus they can be effectively used for strategic asset allocation. Further, the conditional correlation between agriculture commodity future returns with long-run and short-run bond returns declined during the crisis period. Similarly, the conditional correlations of commodity futures indices returns (agriculture, energy and metal) with the stock index declined in periods...
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Ahmedabad (HO) | (Browse shelf) | Vol. 15, Issue. 4 | Available | 018637 |
This article investigates the potential for portfolio diversification benefits of commodity futures in the Indian context. For this purpose, we have estimated dynamic conditional correlations (DCC) between returns of four commodity futures indices and traditional asset class indices such as stock index, long-term bond index and Treasury bill index, separately for the pre-crisis and crisis period using the DCC-GARCH model and daily data ranging from June 2005 to September 2011. Empirical results reveal that there exist very low dynamic conditional correlations between commodity futures indices returns and traditional asset indices returns, an evidence illustrating the potential for portfolio diversification benefits of commodity futures. Commodity futures become more segmented from the traditional asset market; thus they can be effectively used for strategic asset allocation. Further, the conditional correlation between agriculture commodity future returns with long-run and short-run bond returns declined during the crisis period. Similarly, the conditional correlations of commodity futures indices returns (agriculture, energy and metal) with the stock index declined in periods...
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