Abstract: This paper builds on the latter literature on the commodity futures markets and undertakes, for the first time, an in-depth analysis on the investment properties of commodity-related equities (commodity stocks). The empirical evidence suggests that there have been changes in the diversification potential of commodity futures and commodity stocks that coincide with the financialization of commodity futures markets. Over the pre-financialization period, investors are better off when they incorporate commodity futures in their portfolios, whereas over the post-financialization period, commodity stock investing is more profitable. Further analysis on the relationship between commodity futures and stock markets reveals that price-based signals from futures markets, such as the futures basis and prior returns, can be used as indicators of high commodity stock returns.
Publication Year: 2020
Publication Date: 2020-04-27
Language: en
Type: article
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