Su, Yongyang and Lau, Marco Chi Keung (2010): Strategic asset allocation and intertemporal demands: with commodities as an asset class.
Download (437Kb) | Preview
This paper analyzes the role of commodities in the process of strategic asset allocation, with an attempt of computing the weight of commodities relative to traditional assets in a multi-period portfolio choice problem and understanding the economic interpretations to its importance. We find U.S. investors have a significantly stable intertemporal hedging demand for commodities in the long horizons, even when they have access to foreign equity markets, for example, foreign stock market. Our results provide support to institutional investors attempting to include commodities into their strategic asset allocation decision.
|Item Type:||MPRA Paper|
|Original Title:||Strategic asset allocation and intertemporal demands: with commodities as an asset class|
|Keywords:||strategic asset allocation; portfolio choice; hedging demand; commodities; commodity futures|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing; Futures Pricing
|Depositing User:||Yongyang Su|
|Date Deposited:||09. Nov 2010 10:25|
|Last Modified:||12. Feb 2013 11:22|
Barron, J. M., and Ni, J., 2008, Endogenous Asymmetric Information and International Equity Home Bias: The Effects of Portfolio Size and Information Costs, Journal of International Money and Finance, 27, 4, 617-35.
Bodie, Zvi and Victor Rosansky., 1980, "Diversification Returns And Asset Contributions", Financial Analysts Journal, (May/June): 26-32.
Balduzzi, P., Lynch, A., 1999, Transaction costs and predictability: some utility cost calculations, Journal of Financial Economics, 52, 47--78.
Barberis, N.C., 2000, Investing for the long run when returns are predictable, Journal of Finance, 55, 225--264. Bhamra, H.S., Uppal, R., 2006, The role of risk aversion and intertemporal substitution in dynamic consumption-portfolio choice with recursive utility, Journal of Economic Dynamics and Control, 30 (6), 967--991.
Brennan, M.J., Schwartz, E.S., Lagnado, R., 1997, Strategic asset allocation, Journal of Economic Dynamics and Control, 21, 1377--1403.
Campbell, J.Y., 1991. A variance decomposition for stock returns. Economic Journal 101, 157--179.
Campbell, J.Y., Viceira, L.M., 1999, Consumption and portfolio decisions when expected returns are time varying, Quarterly Journal of Economics, 114, 433--495.
Campbell, J.Y., Viceira, L.M., 2000, Consumption and portfolio decisions when expected returns are time varying: erratum, Unpublished paper, Harvard University, available on the authors' websites.
Campbell, J.Y., Viceira, L.M., 2001, Who should buy long-term bonds? American Economic Review, 91, 99--127.
Campbell, J.Y., Viceira, L.M., 2002, Strategic Asset Allocation: Portfolio Choice for Long-Term Investors, Oxford University Press, Oxford.
Campbell, J.Y., Chan, Y.L., Viceira, L.M., 2003, A multivariate model of strategic asset allocation, Journal of Financial Economics, 67 (1), 41--81.
Cooper, L., and Kaplanis, E., 1994, Home Bias in Equity Portfolios, Inflation Hedging, and International Capital Market Equilibrium, Review of Financial Studies, 7, 1, 45-60.
Coval, J.D., and Moskowitz, T.J., 1999, Home Bias at Home: Local Equity Preference in Domestic Portfolios, Journal of Finance, 54, 6, 2045-73.
Gorton, Gary, and Geert Rouwenhorst. 2006, Facts and Fantasies about Commodity Futures. Financial Analysts Journal, 62, 47-68.
Greer, Robert J., 1978, Conservative Commodities a Key Inflation Hedge, Journal of Portfolio Management, 4(4), 26-29.
Idzorek, M.T., 2008, Strategic Asset Allocation and Commodities, Ibboston Associates Reports.
Merton, R.C., 1969, Lifetime portfolio selection under uncertainty: the continuous time case, Review of Economics and Statistics, 51, 3, 247--257.
Norman, S., and Xu. X., 2003, Understanding the Equity Home Bias: Evidence from Survey Data, Review of Economics and Statistics, 85, 2, 307-12.
Rapach, E.D., and Wohar, E.M., 2009, "International Asset Allocation with Regime Shifts," Journal of International Money and Finance, 28, 1137--1387.
Lynch, A.W., 2001, Portfolio choice and equity characteristics: characterizing the hedging demands induced by return predictability, Journal of Financial Economics, 62, 67--130.
Lynch, A.W., Tan, S., 2010, Multiple Risky Assets, Transaction Costs and Return Predictability: Allocation Rules and Implications for U.S. Investors, Journal of Financial and Quantitative Analysis, Forthcoming.
Stambaugh, R.F., 1999. Predictive regressions, Journal of Financial Economics, 54, 375--421.
Available Versions of this Item
Strategic asset allocation and intertemporal demands: with commodities as an asset class. (deposited 04. Nov 2010 18:27)
- Strategic asset allocation and intertemporal demands: with commodities as an asset class. (deposited 09. Nov 2010 10:25) [Currently Displayed]