On the Diversification Benefits of Commodity ETFs

Yu-Jen Hsiao, Tumendelger Sukhbaatar

Research output: Contribution to journalArticle

Abstract

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 the US investors. Applying mean-variance spanning tests, we analyze the monthly returns of commodity ETFs from January 2005 to December 2012 and find that adding commodity ETFs does not lead to a statistically significant increase in the investment opportunity set for the US investors. However, the US investors can utilize commodity ETFs to enhance their portfolio performance, as measured by the Sharpe ratio. We further show that the diversification contribution varies greatly among the different commodity ETFs. Overall, the results confirm that specific-commodity ETF, like Gold or Natural Gas are valuable investments from the perspective of diversification.
Translated title of the contribution商品ETF的多角化效果
Original languageEnglish
Pages (from-to)105-130
Number of pages26
Journal證券市場發展季刊
Volume27
Issue number3
DOIs
Publication statusPublished - Sep 1 2015

Keywords

  • 商品類指數股票型證券投資信託基金
  • 多角化
  • 均異擴張檢定
  • Commodity Exchange Traded Funds (Commodity ETFs)
  • Diversification
  • Mean-Variance Spanning and Intersection
  • Sharpe Ratio

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