Diversification In Crude Oil And Other Commodities: A Comparative Analysis

Abdullah, Ahmad Monir and Mohammed Masih, Abul Mansur (2016) Diversification In Crude Oil And Other Commodities: A Comparative Analysis. Asian Academy of Management Journal of Accounting and Finance, 12 (1). pp. 1-28. ISSN 1823-4992

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Abstract

An understanding of how volatilities of and correlations between commodity returns change over time including their directions (positive or negative) and size (stronger or weaker) is of crucial importance for both the domestic and international investors with a view to diversifying their portfolios for hedging against unforeseen risks. This paper is an humble attempt to add value to the existing literature by empirically testing the ‘timevarying’ and ‘scale dependent’ volatilities of and correlations of the sample commodities. Particularly, by incorporating scale dependence, it is able to identify unique portfolio diversification opportunities for different set of investors bearing different investment horizons or holding periods. In order to address the research objectives, we have applied the vector error-correction test and several recently introduced econometric techniques such as the Maximum Overlap Discrete Wavelet Transform (MODWT), Continuous Wavelet Transform (CWT) and Multivariate GARCH – Dynamic Conditional Correlation. The data used in this paper is the daily data of seven commodities (crude oil, gas, gold, silver, copper, soybean and corn) prices from 1 January 2007 until 31 December 2013.

Item Type: Article
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28-70 Management. Industrial Management
Divisions: Penerbit Universiti Sains Malaysia (USM Press) > Asian Academy of Management Journal of Accounting and Finance
Depositing User: Mr Firdaus Mohamad
Date Deposited: 15 Nov 2017 07:26
Last Modified: 15 Nov 2017 07:26
URI: http://eprints.usm.my/id/eprint/37435

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