The Stability of Component Assets in Optimal Portfolios of Stock and Commodity Indexes

Anna Górska1, Monika Krawiec2
1, 2 Szkoła Główna Gospodarstwa Wiejskiego w Warszawie
Górska, Anna; ORCID: 0000-0003-0763-0550 (Szkoła Główna Gospodarstwa Wiejskiego w Warszawie)
Krawiec, Monika (Szkoła Główna Gospodarstwa Wiejskiego w Warszawie)
The Stability of Component Assets in Optimal Portfolios of Stock and Commodity Indexes
Zeszyty Naukowe SGGW w Warszawie - Problemy Rolnictwa Światowego, 2016, vol.16(31), nr 4, s. 33-43

Key words

stock and commodity indexes Markowitz portfolio optimization component stability

Abstract

The turbulences in financial markets increased the interest in commodity investments as an alternative asset class for potential risk diversification. A plethora of past and present studies documents the diversification benefits achieved by adding commodities to the traditional security portfolios. Most of commodity diversification papers ignore the stability of component assets in the optimal portfolio. This paper examines both, the stability and performance of optimal Markowitz portfolios over time. The portfolios are composed of commodity and stock indexes. Their risk and returns are compared to the risk and return of the equally weighted benchmark portfolio.