The Role of Agricultural Commodity Prices in a Portfolio

• Main Authors: Chatchai Khiewngamdee, Quanrui Song, Somsak Chanaim
• Format: Book Series
• Published: 2018
• Subjects: Computer Science; Mathematics
• Online Access: https://www.scopus.com/inward/record.uri?partnerID=HzOxMe3b&scp=85044004706&origin=inward; http://cmuir.cmu.ac.th/jspui/handle/6653943832/58555
• Institution: Chiang Mai University

© 2018, Springer International Publishing AG, part of Springer Nature. This paper aims to investigate whether including agricultural commodities can improve the portfolio performance by comparing the risk and return of multi-asset portfolio with and without an agricultural commodity price. To achieve our goal, we propose fitting a C-Vine copula based AR-GARCH model to interval data which allows us to capture uncertain characteristics that cannot be sometimes fully described with single data series. By using a convex combination method, we can obtain expected marginal distribution and joint density function, respectively. We then evaluate the portfolios’ risk and return using the expected shortfall concept. The results present that the average risk and return of non-agricultural portfolio outperforms agricultural portfolios. However, considering the one step ahead forecasting efficient frontier, the portfolio with soybean futures becomes superior to other portfolios.