We thank a reviewer for numerous useful suggestions that have improved the quality of this study. We thank David Nawrocki for his help with the Portfolio Management Software Package (PMSP) program. All portfolio results are generated using PMSP.
A Markowitz Optimization of Commodity Futures Portfolios
Article first published online: 27 MAR 2012
© 2012 Wiley Periodicals, Inc.
Journal of Futures Markets
Volume 33, Issue 4, pages 343–368, April 2013
How to Cite
You, L. and Daigler, R. T. (2013), A Markowitz Optimization of Commodity Futures Portfolios. J. Fut. Mark., 33: 343–368. doi: 10.1002/fut.21553
- Issue published online: 7 JAN 2013
- Article first published online: 27 MAR 2012
- Manuscript Accepted: 30 DEC 2011
- Manuscript Received: 13 MAY 2011
We examine the diversification benefits of using individual futures contracts instead of simply a commodity index. We determine the ex-ante, ex-post, and stability results for optimal Markowitz portfolios, investigate the instability between the ex-ante and ex-post results, and compare our results to traditional and naïve portfolios. The ex-ante complete futures portfolio dominates the traditional and naive portfolios and the ex-post portfolio outperforms the naïve portfolio. The instability between the ex-ante and ex-post results is primarily driven by the time-varying returns of the individual assets rather than by risk. Finally, the Sharpe portfolio results are essentially identical to the Markowitz results. © 2012 Wiley Periodicals, Inc. Jrl Fut Mark 33:343-368, 2013