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Historical Performance of Commodity and Stock Markets

  • Zapata, Hector O.
  • Detre, Joshua D.
  • Hanabuchi, Tatsuya

This paper examines two interrelated issues in commodity markets, namely, the cyclical relationship between stocks and commodities and the function of commodity and agribusiness indexes in portfolios. A high negative correlation has existed between stock and commodity prices over the past 140 years. Moreover, the two markets have alternated in price leadership with 29–32-year cycles. The recent price dominance in agricultural commodities started in 2000, a result supported by the empirical results of the portfolio allocation analysis. For a risk-averse investor, irrespective of the period analyzed, placing funds in agribusiness and/or agricultural commodity indexes was sound investing.

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Article provided by Southern Agricultural Economics Association in its journal Journal of Agricultural and Applied Economics.

Volume (Year): 44 (2012)
Issue (Month): 03 (August)

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Handle: RePEc:ags:joaaec:130273
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  1. Thomas W. Hertel & Jayson Beckman, 2011. "Commodity Price Volatility in the Biofuel Era: An Examination of the Linkage Between Energy and Agricultural Markets," NBER Working Papers 16824, National Bureau of Economic Research, Inc.
  2. Adrian Pagan & Don Harding, 2005. "A suggested framework for classifying the modes of cycle research," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 151-159.
  3. Andrew Dorward, 2001. "The Effects of Transaction Costs, Power and Risk on Contractual Arrangements: A Conceptual Framework for Quantitative Analysis," Journal of Agricultural Economics, Wiley Blackwell, vol. 52(2), pages 59-73.
  4. Peng, Wei & Bosch, Darrell J., 2001. "Risk And Site Factors Affecting Potential Nitrogen Delivery In The Virginia Coastal Plain," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 33(01), April.
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