Γκέκα, Στεφανία - Αλεξάνδρα
Geka, Stefania - Alexandra
Commodities have been treated as return boosters, and risk hedgers in portfolio management, especially after the 2007 crisis. The purpose of this research is to examine if and in what extent do commodities affect the portfolio’s mean return and diversification benefits, as measured by the portfolio’s standard deviation, Value at Risk and Sharpe ratio. For this purpose we constructed two – asset portfolios, containing a stock index and a bond index, and three-asset portfolios, containing a stock, a bond and a commodity index. We estimated the parameters in examination (mean return, standard deviation, Value at Risk and Sharpe ratio) of these portfolios with Monte Carlo simulations, for three different periods: (1) The whole period of our data, (2) the combined expansion periods (as noted by the National Bureau of Economic Research) and (3) the combined recession periods. We evaluate those results, to conclude on the commodities impact in portfolio optimization.