Assessing efficiency and investment opportunities in commodities: A time series and portfolio simulations approach |
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| Institution: | 1. University of Evry and EconomiX University of Evry, 2 rue Facteur Cheval, 91025 Evry, France;2. EDC Paris Business School, OCRE Lab, 70 Galeries Des Damiers, La Defense 1, Courbevoie 92415, Paris, France;1. Department of Political Science, University of Roma Tre, Via Chiabrera, 199, 00145 Rome, Italy;2. Department of Political Science, University of Roma Tre, Via G. Chiabrera, 199, I-00145 Rome;1. Division of Economics, Hankuk University of Foreign Studies, 107, Imun-ro, Dongdaemun-gu, Seoul, Republic of Korea;2. Fiscal Policy Analysis Division, The National Assembly Budget Office, 1, Uisadang-ro, Yeongdeungpo-gu, Seoul, Republic of Korea;1. College of Management and Economics, Tianjin University, Tianjin 300072, China;2. China Center for Social Computing and Analytics, Tianjin University, Tianjin 300072, China;3. Key Laboratory of Computation and Analytics of Complex Management Systems, Tianjin 300072, China;4. Carroll School of Management, Boston College, MA 02467, USA;1. University of Lille 2, Lille, France;2. Foreign Trade University, Vietnam;3. Skema Business School-LSMRC, Lille, France;1. Research and Modelling Division, Financial Stability Department, Sveriges Riksbank (Central Bank of Sweden), SE-103 37 Stockholm, Sweden;2. KOF Swiss Economic Institute, ETH Zürich, Switzerland |
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| Abstract: | This paper investigates the informational efficiency hypothesis in the short and long term for four major commodity markets (oil, gas, electricity, and coal) from January 1997 to January 2016. Unlike previous studies, we provide a more concise comparative analysis by focusing on different classes of commodities for a large sample, including 5 developed and 3 emerging regions and covering 46 countries. We apply different parametric and non-parametric econometric tests. Our study provides two interesting findings. First, we show that commodity markets are informationally inefficient in the short term. Our portfolio simulations highlight that commodities might provide “good” investment opportunities, but those opportunities vary according to commodity class and regions. Second, we show that most commodity markets become informationally efficient in the long term, thereby reducing investors' interest for the duration. Thus, commodity markets might be used to hedge investor’s portfolios, particularly for speculators and chartists in the short term, while these investments might not be appealing in these markets in the long term. |
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| Keywords: | Informational efficiency Commodity markets Hedging Portfolio simulations Time series |
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