Adding commodity futures to the Swedish stock portfolio, A good strategy for better diversification?
(2007)Department of Economics
- Abstract
- By using data from Ecovision on the DJ AIG commodity index made up of commodity futures and the OMX index consisting of Swedish equities I have estimated the correlation between Swedish equities and US commodity futures. The correlation has been examined in a multivariate GARCH setting by using the BEKK model. The purpose has been to examine if commodity futures from a US exchange market can improve the Sharpe ratio of a portfolio made up of Swedish equities. The main interest is to see if commodity futures can keep their good properties when they are affected by FX markets. The akaike criterion shows that the BEKK model used is a good fit for the data. The result shows a statistically significant low correlation between the OMX index and... (More)
- By using data from Ecovision on the DJ AIG commodity index made up of commodity futures and the OMX index consisting of Swedish equities I have estimated the correlation between Swedish equities and US commodity futures. The correlation has been examined in a multivariate GARCH setting by using the BEKK model. The purpose has been to examine if commodity futures from a US exchange market can improve the Sharpe ratio of a portfolio made up of Swedish equities. The main interest is to see if commodity futures can keep their good properties when they are affected by FX markets. The akaike criterion shows that the BEKK model used is a good fit for the data. The result shows a statistically significant low correlation between the OMX index and the DJ AIG during the test period. DJ AIG has also during the period had approximately the same rate of return as the OMX. Hence this paper shows that adding commodity futures will diversify the portfolio and therefore improve the Sharpe ratio thus lowering volatility at a given rate of return. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/1334532
- author
- Olsson, Daniel
- supervisor
- organization
- year
- 2007
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- GARCH, correlation, commodity, future, BEKK, Economics, econometrics, economic theory, economic systems, economic policy, Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik
- language
- English
- id
- 1334532
- date added to LUP
- 2007-09-13 00:00:00
- date last changed
- 2010-08-03 10:51:09
@misc{1334532,
abstract = {{By using data from Ecovision on the DJ AIG commodity index made up of commodity futures and the OMX index consisting of Swedish equities I have estimated the correlation between Swedish equities and US commodity futures. The correlation has been examined in a multivariate GARCH setting by using the BEKK model. The purpose has been to examine if commodity futures from a US exchange market can improve the Sharpe ratio of a portfolio made up of Swedish equities. The main interest is to see if commodity futures can keep their good properties when they are affected by FX markets. The akaike criterion shows that the BEKK model used is a good fit for the data. The result shows a statistically significant low correlation between the OMX index and the DJ AIG during the test period. DJ AIG has also during the period had approximately the same rate of return as the OMX. Hence this paper shows that adding commodity futures will diversify the portfolio and therefore improve the Sharpe ratio thus lowering volatility at a given rate of return.}},
author = {{Olsson, Daniel}},
language = {{eng}},
note = {{Student Paper}},
title = {{Adding commodity futures to the Swedish stock portfolio, A good strategy for better diversification?}},
year = {{2007}},
}