A Markowitz Optimization of Commodity Futures Portfolios |
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| Authors: | Leyuan You Robert T Daigler |
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| Institution: | 1. Leyuan You is an Assistant Professor of Finance, Department of Finance and Economics, McCoy College of Business Administration, Texas State University‐San Marcos, San Marcos, Texas;2. Robert T. Daigler is Knight Ridder Research Professor of Finance, Florida International University, Miami, Florida |
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| Abstract: | We examine the diversification benefits of using individual futures contracts instead of simply a commodity index. We determine the ex‐ante, ex‐post, and stability results for optimal Markowitz portfolios, investigate the instability between the ex‐ante and ex‐post results, and compare our results to traditional and naïve portfolios. The ex‐ante complete futures portfolio dominates the traditional and naive portfolios and the ex‐post portfolio outperforms the naïve portfolio. The instability between the ex‐ante and ex‐post results is primarily driven by the time‐varying returns of the individual assets rather than by risk. Finally, the Sharpe portfolio results are essentially identical to the Markowitz results. © 2012 Wiley Periodicals, Inc. Jrl Fut Mark 33:343‐368, 2013 |
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