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We revisit the question whether commodities should be included in investors' portfolios. We employ for the first time a stochastic dominance efficiency (SDE) approach to construct optimal portfolios with and without commodities and we evaluate their comparative performance. SDE circumvents the...
Persistent link: https://www.econbiz.de/10012930468
In light of the recently passed 2010 Dodd–Frank Act, we assess the effect of margin changes on prices/returns, the risk-sharing between speculators and hedgers, and the price stability of a large number of commodity futures markets. We find that margin increases decrease the rate at which...
Persistent link: https://www.econbiz.de/10013090506
In light of the recently passed 2010 Dodd–Frank Act, we assess the effect of margin changes on prices, the risk-sharing between speculators and hedgers, and the price stability of 20 commodity futures markets. We find that margin increases decrease the rate at which prices change, yet they...
Persistent link: https://www.econbiz.de/10012995791
Persistent link: https://www.econbiz.de/10011818029
We revisit the question whether commodities should be included in investors' portfolios. We employ for the first time a stochastic dominance efficiency (SDE) approach to construct optimal portfolios with and without commodities and we evaluate their comparative performance. SDE circumvents the...
Persistent link: https://www.econbiz.de/10011473894
In light of the recently passed 2010 Dodd-Frank Act, we assess the effect of margin changes on prices, the risk-sharing between speculators and hedgers, and the price stability of 20 commodity futures markets. We find that margin increases decrease the rate at which prices change, yet they...
Persistent link: https://www.econbiz.de/10010472794
Persistent link: https://www.econbiz.de/10011703794
We test one of the main predictions of the financial flexibility paradigm, that expectations about future firm-specific investment shocks affect the firm's leverage. We extract the expectations of small and large future shocks from the market prices of equity options. We find that leverage...
Persistent link: https://www.econbiz.de/10012904711
Over the last decade institutional and individual investors have increased their allocated share of wealth to commodities immensely. In this short article, we discuss some common beliefs and point out the misconceptions on the motivation for investing in commodities, whether commodities should...
Persistent link: https://www.econbiz.de/10013109412
We document that properly scaled deviations from put-call parity estimate the contribution of market frictions to expected returns (CFER) accurately, by means of a non-parametric theoretically founded identification strategy. The required conditions are that our estimator predicts the underlying...
Persistent link: https://www.econbiz.de/10012852972