scholarly journals Emergence of Commodity Derivatives as Defensive Instrument in Portfolio Risk Hedging: A Case of Indian Commodity Markets

2017 ◽  
Vol 12 (1) ◽  
pp. 202-234 ◽  
Author(s):  
Shelly Singhal
Keyword(s):  
Efficient Frontier ◽  
Commodity Markets ◽  
Portfolio Risk ◽  
Daily Growth ◽  
Risk Hedging ◽  
Risk Return ◽  
Daily Data ◽  
Relative Standard ◽  
Commodity Derivatives ◽  
Diversification Benefit

AbstractThis paper empirically examines whether commodity derivatives can be used as an alternative investment asset in India where commodity markets are at emerging state and provides the same diversification benefit as they provide in developed commodity markets. In India only commodity futures are prevalent so various commodity indices representing various sectors has been used in the study. Diversification aspect of commodity derivatives has been tested initially by using correlation analysis. Compounded Daily Growth rate and Relative Standard deviation has been used as a measure of calculating risk and return of daily data of SENSEX, BOND and four Commodity Indices (MCX Comdex, MCX AGRI, MCX Metal, MCX Energy). Markowitz Efficient Frontier theory has been used to calculate portfolio risk return and Sharpe risk adjusted ratio has been used to evaluate the various portfolios. Optimal portfolio has been obtained for the combination of equity, bond and commodity and overall results of the study indicate that an investor who is risk averse will prefer to invest in combination of SENSEX, BOND & MCX Energy whereas an investor who gets utility by taking more risk for more returns will prefer to invest in combination of SENSEX, BOND & MCX Metal. Investor having inclination towards moderate risk return would tend to invest in MCX AGRI along with SENSEX and BOND.

To Save or Savor: A Review of Approaches for Measuring Wine as an Investment

2014 ◽  
Vol 9 (3) ◽  
pp. 225-248 ◽  
Author(s):  
James J. Fogarty ◽  
Rohan Sadler
Keyword(s):  
Estimation Method ◽  
Efficient Frontier ◽  
Hedonic Model ◽  
Portfolio Risk ◽  
Return Distribution ◽  
Simple Modification ◽  
Risk Diversification ◽  
Comprehensive Method ◽  
Diversification Benefit ◽  
Jel Classifications

AbstractIn the literature, there is no standard approach for estimating the return to wine or testing for a portfolio risk diversification benefit from holding wine. Using auction data for Australian wine, we show that the estimation method has a material impact on the estimated wine return distribution and that the type of diversification benefit test used influences whether or not wine is found to provide a portfolio risk diversification benefit. Our results indicated that a simple modification to the hedonic model, which we call a pooled model, is an appropriate method for estimating the return to infrequently traded heterogeneous assets such as wine. Across the various approaches to testing for a risk diversification benefit, we find direct estimation of the efficient frontier with bootstrapped confidence intervals to be the most transparent and comprehensive method of illustrating wine's potential for lowering portfolio risk. (JEL Classifications: G11, C61, C13)

scholarly journals Fed and ECB: which is informative in determining the DCC between bitcoin and energy commodities?

2020 ◽  
Vol 4 (1) ◽  
pp. 77-102
Author(s):  
Abdelkader Derbali ◽  
Lamia Jamel ◽  
Monia Ben Ltaifa ◽  
Ahmed K. Elnagar ◽  
Ali Lamouchi
Keyword(s):  
Monetary Policy ◽  
Design Methodology ◽  
Commodity Markets ◽  
Portfolio Risk ◽  
Conditional Correlation ◽  
Predictive Capacity ◽  
Federal Funds ◽  
Content Type ◽  
The Us ◽  
Risk Managers

PurposeThis paper provides an important perspective to the predictive capacity of Fed and European Central Bank (ECB) meeting dates and production announcements for the dynamic conditional correlation (DCC) between Bitcoin and energy commodities returns and volatilities during the period from August 11, 2015 to March 31, 2018.Design/methodology/approachTo assess empirically the unanticipated component of the US and ECB monetary policy, the authors pursue the Kuttner's approach and use the federal funds futures and the ECB funds futures to assess the surprise component. The authors use the approach of DCC as introduced by Engle (2002) during the period from August 11, 2015 to March 31, 2018.FindingsThe authors’ results suggest strong significant DCCs between Bitcoin and energy commodity markets if monetary policy surprises are incorporated in variance. These results confirmed the financialization of Bitcoin and commodity energy markets. Finally, the DCC between Bitcoin and energy commodity markets appears to respond considerably more in the case of Fed surprises than ECB surprises.Originality/valueThis study is a crucial topic for policymakers and portfolio risk managers.

scholarly journals On Imposing ESG Constraints of Portfolio Selection for Sustainable Investment and Comparing the Efficient Frontiers in the Weight Space

SAGE Open ◽  
2020 ◽  
Vol 10 (4) ◽  
pp. 215824402097507
Author(s):  
Yue Qi ◽  
Xiaolin Li
Keyword(s):  
Portfolio Selection ◽  
Efficient Frontier ◽  
Weight Space ◽  
Efficient Frontiers ◽  
Risk Return ◽  
Screening Strategies ◽  
Dow Jones Industrial Average ◽  
Sustainable Investment ◽  
Selection For ◽  
Portfolio Selection Model

Sustainable investment is typically fulfilled by screening of environmental, social, and governance (ESG); the screening strategies are practical and expedite sustainable-investment development. However, the strategies typically build portfolios by a list of good stocks and ignore portfolio completeness. Moreover, there has been limited literature to study the portfolio weights of sustainable investment in the weight space. In such an area, this article contributes to the literature as follows: We extend a conventional portfolio-selection model and impose ESG constraints. We analytically solve our model by computing the efficient frontier and prove that the frontier’s portfolio weights all lie on a ray (half line). By the ray structure, we prove that portfolio selection for sustainable investment and conventional portfolio selection fundamentally possess highly different portfolio weights. Overall, our aim is comparing the portfolio weights of sustainable portfolio selection and of conventional portfolio selection; the comparison result has been unknown until now. The result is important for sustainable investment because portfolio weights are the foundation of portfolio selection and investments. We sample the component stocks of Dow Jones Industrial Average Index from 2004 to 2013 and find that our efficient frontier and the conventional efficient frontier are quite similar. Therefore, in plain financial language, investors can still obtain risk-return performance similar to conventional portfolio selection after imposing strong ESG requirements, although the portfolio weights can be totally different. The result is both an endorsement and a reminder for sustainable investment.

A Study on the Strategic Application of Abnormal Risk-Return Relationship

2017 ◽  
Vol 25 (3) ◽  
pp. 339-367
Author(s):  
Youngmin Choi ◽  
Bohyun Yoon
Keyword(s):  
Capital Market ◽  
Efficient Frontier ◽  
Investment Strategies ◽  
Traditional Concept ◽  
Period Analysis ◽  
Empirical Results ◽  
Risk Return ◽  
High Return ◽  
Before And After ◽  
Preliminary Study

This paper focuses on the strategic application based on the empirical results of risk-return relationship against the classical concept. Empirical analysis from domestic data, we verify that the traditional concept-‘high risk, high return’ relationship are maintained, however, we confirm the falling pattern in the highest total volatility group. Even though we implies double sorting method to control the well known systematic factor such as BM and size, we still confirm such abnormal risk-return relationship. Furthermore, we perform sub-period analysis before and after the liberalization of Korean capital market and we find such abnormal risk-return relationship is appeared after the liberalization. Based on our empirical results, we establish and verify the new benchmark that evenly allocate highest volatility portfolio to sub-volatility portfolio. Under the new benchmark, we confirm the expansion of the efficient frontier and the improvement of Sharpe ratio. We believe that our results provide an applicability research of smart beta strategy and new benchmark based on such strategy. We expect our research to be used as preliminary study to overcome the era of “new normal” and to reform the investment strategies correspond to segmentation of benchmark.

Landmark buildings and diversification opportunities in the residential market

2016 ◽  
Vol 9 (4) ◽  
pp. 429-445 ◽  
Author(s):  
Lucia Gibilaro ◽  
Gianluca Mattarocci
Keyword(s):  
Asset Allocation ◽  
Time Horizon ◽  
Efficient Frontier ◽  
Diversification Strategy ◽  
Content Type ◽  
Risk Return ◽  
Good Investment ◽  
Asset Class ◽  
Housing Investments

Purpose This article aims to analyze the performance and risk of landmark building in the housing sector and to evaluate their usefulness for a diversification strategy. Design/methodology/approach After comparing summary statistics on the performance of landmark building with respect to other types of housing investments, the article evaluates their usefulness for a diversification strategy. The role of landmark buildings is studied using the modern portfolio theory and evaluating the role of this type of asset in the optimal asset allocation. The analysis is performed considering both the risk/return trade-off in a one-year and a multiple-year time horizon. Findings The results show that a landmark building can be a good investment opportunity, especially for high-risk/return investors. A not perfect correlation of the returns of this asset class with other types of housing investments implies the existence of a minimum investment in this asset class for almost all portfolios on the efficient frontier. Results are robust with respect to the length of the investment time horizon. Originality/value The article presents a unique analysis of intra-housing market diversification opportunities focusing on the role of landmark building in the portfolio construction. Empirical evidence supports the hypothesis that real estate investors can take advantage of investing in landmark buildings in the residential sector as well because there are no reasons to limit such investments to trophy buildings in the office and commercial sectors.

scholarly journals Investment strategy performance under tracking error constraints

2019 ◽  
Vol 16 (1) ◽  
pp. 239-257 ◽  
Author(s):  
Carig Evans ◽  
Gary van Vuuren
Keyword(s):  
Performance Indicators ◽  
Tracking Error ◽  
Efficient Frontier ◽  
Investment Strategy ◽  
Risk Return ◽  
Portfolio Strategies ◽  
Investment Opportunities ◽  
Strategy Performance ◽  
Relationship Of ◽  
Mean Variance

Recent (2018) evidence identifies the increased need for active managers to facilitate the exploitation of investment opportunities found in inefficient markets. Typically, active portfolios are subject to tracking error (TE) constraints. The risk-return relationship of such constrained portfolios is described by an ellipse in mean-variance space, known as the constant TE frontier. Although previous work assessed the performance of active portfolio strategies on the efficient frontier, this article uses several performance indicators to evaluate the outperformance of six active portfolio strategies over the benchmark – subject to various TE constraints – on the constant TE frontier.

scholarly journals THE ROLE OF FORWARD MARKETS COMMISSION IN INDIAN COMMODITY MARKETS

2015 ◽  
Vol 3 (11) ◽  
pp. 87-105
Author(s):  
Shree Bhagwat ◽  
Angad Singh Maravi
Keyword(s):  
Commodity Markets ◽  
Commodity Futures ◽  
Commodity Market ◽  
Futures Trading ◽  
Forward Markets ◽  
Agriculture Sector ◽  
Risk Management Process ◽  
Current Scenario ◽  
Commodity Derivatives

This paper examines the role of Forward Markets Commission (FMC) in Indian Commodity Markets. The Results show important developments of Forward Markets Commission. Commodity futures and derivatives have a crucial role to play in the price risk management process, especially in agriculture sector. The significance of commodity derivatives has increased in the current scenario. India has long history of trade in commodity derivatives. Organized commodity derivatives in India started as early as 1875, barely about a decade after they started in Chicago. Since 2003, when commodity futures’ trading was permitted, commodity futures market in India has experienced an unprecedented boom in terms of the number of modern exchanges, number of commodities allowed for derivatives trading as well as the value of futures trading in commodities. There are 6 national and 16 regional commodity exchanges recognized and regulated by the FMC. Different types of commodities such as agricultural; bullion, plantation, energy etc. is traded on commodity exchanges in the country. So considering these points an attempt has been made to know the regulatory framework of commodity futures and derivatives market in India and various developments in Indian commodity market and commodity exchanges. This study is an attempt to investigate the performance of Forward Markets Commission in India and its role in Indian commodity market.

Sign in / Sign up

Export Citation Format

Share Document