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Stocks, Commodities and Business Cycle Fluctuations – Seeking the Diversification Benefits

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  • Radoslaw Kurach

    ()
    (Wroclaw University of Economics, Poland)

Abstract

In this study we empirically verify the diversification potential of different commodity sectors for equity portfolios. We also try to find the explanation of varying cross-sectoral diversification benefits by verifying the relationship between macroeconomic variables and commodity indices. We employ correlation analysis for our purposes. The obtained results indicate that Precious Metal and Livestock are valuable equity portfolio diversifiers, while Industrial Metals volatility has much in common with the fluctuations of broad stock market.

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Bibliographic Info

Article provided by Uniwersytet Mikolaja Kopernika in its journal Equilibrium. Quarterly Journal of Economics and Economic Policy.

Volume (Year): 7, Issue 4 (2012)
Issue (Month): ()
Pages: 101-116

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Handle: RePEc:cpn:umkequ:2012:v4:6

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Related research

Keywords: stock and commodity markets; diversification benefits; business cycle fluctuations;

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References

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  1. Matthias Gubler & Matthias S. Hertweck, 2013. "Commodity Price Shocks and the Business Cycle: Structural Evidence for the U.S," Working Papers, Swiss National Bank 2013-05, Swiss National Bank.
  2. Demidova-Menzel, Nadeshda & Heidorn, Thomas, 2007. "Gold in the investment portfolio," Frankfurt School - Working Paper Series, Frankfurt School of Finance and Management 87, Frankfurt School of Finance and Management.
  3. Mohanty, Jaya & Singh, Bhupal & Jain, Rajeev, 2003. "Business cycles and leading indicators of industrial activity in India," MPRA Paper 12149, University Library of Munich, Germany.
  4. Levy, Haim & Sarnat, Marshall, 1970. "International Diversification of Investment Portfolios," American Economic Review, American Economic Association, American Economic Association, vol. 60(4), pages 668-75, September.
  5. Robert J. Hodrick & Edward Prescott, 1981. "Post-War U.S. Business Cycles: An Empirical Investigation," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 451, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Marianne Baxter & Michael A. Kouparitsas, 2004. "Determinants of Business Cycle Comovement: A Robust Analysis," NBER Working Papers 10725, National Bureau of Economic Research, Inc.
  7. Inklaar, Robert & de Haan, Jakob, 2001. "Is There Really a European Business Cycle? A Comment," Oxford Economic Papers, Oxford University Press, vol. 53(2), pages 215-20, April.
  8. Ulrich Fritsche & Felix Marklein, 2001. "Leading Indicators of Euroland Business Cycles," Discussion Papers of DIW Berlin 238, DIW Berlin, German Institute for Economic Research.
  9. Dieter Hess & He Huang & Alexandra Niessen, 2008. "How do commodity futures respond to macroeconomic news?," Financial Markets and Portfolio Management, Springer, Springer, vol. 22(2), pages 127-146, June.
  10. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, American Finance Association, vol. 7(1), pages 77-91, 03.
  11. Flood, Robert P & Rose, Andrew K, 2009. "Inflation Targeting and Business Cycle Synchronization," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7377, C.E.P.R. Discussion Papers.
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Cited by:
  1. Rados³aw Kurach, 2012. "Seeking The Diversification Benefits With Foreign Equities And Commodities – The Case Of Polish Investor," "e-Finanse", University of Information Technology and Management, Institute of Financial Research and Analysis, University of Information Technology and Management, Institute of Financial Research and Analysis, vol. 8(3), pages 26-36, October.

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