The Risks of Commodity Investing

This chapter will cover investing in commodities through futures contracts.

Author(s):

Hilary Till, Joseph Eagleeye

Hilary Till* and Joseph EagleeyeCo-Founders, Premia Capital Management, LLC* Research Associate with the EDHEC Risk and Asset Management Research Centre

It will note the unique sources of risk and return for such investments. We will also discuss the factors that one should take into consideration before deciding upon how much of their portfolio should be in commodities. We will note how an investment in commodities can be used as either a diversifier for a traditional portfolio or as a source of returns, depending on the market environment. Finally, we will argue that some of the considerations that apply to equity investing are also relevant for commodity investing.

Type: Working paper
Date: le 07/08/2006
Research Cluster : Finance

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