Asset Class Allocations

When you actually conduct studies of relationships that people ASSUME exist, you find that they rarely actually exist. Investigating stochastic behavior of the prices and volatility of of the leading commodity markets and comparing them to the debt and equity markets, produces a very interesting result. We observe a substantial degree of uniformity in the behavior of the series. It is totally inappropriate to treat different kinds of commodities as a single asset class. Agriculture, metals, meats, etc.., are normally treated as a single asset class in the academic literature and in the investment industry. However, commodities can be a useful diversification to equity volatility as well as equity returns if truly managed as separate asset classes. Risk measurement, options pricing, and hedging strategies exemplify the economic impacts of the differences across commodity spectrum correlated to equity and debt markets. We will be including these studies in the future for asset class allocations.


Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s