On the diversification benefits of commodity ETFs from the perspective of US investors

• Main Author: Tumendelger Sukhbaatar
• Other Authors: Yu-Jen,Hsiao
• Format: Others
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/48110968316100346041

碩士 === 國立東華大學 === 財務金融學系 === 101 === This paper investigates whether investors can improve their investment opportunity sets through the addition of commodity exchange traded funds (ETFs) into various groupings of benchmark portfolios from the perspective of US investors. Applying mean-variance spanning tests, we analyzing the monthly return of commodity ETFs from January 2005 to December 2012 and find that adding commodity ETFs does not lead to a statistically significant enlargement of the investment opportunity set for U.S. investors. However, U.S. investors can utilize commodity ETFs to enhance their equity portfolio performance, as measured by the Sharpe ratio. We further show that, for the subcategory diversification, gold and natural gas enhance the portfolio performance in terms of both risk and return. Overall, the results confirm that specific-commodity ETFs are valuable investments from the perspective of diversification.