Historical Performance of Commodity and Stock Markets
2017
Zapata, Hector O. | Detre, Joshua D. | Hanabuchi, Tatsuya
This paper examines two interrelated issues in commodity markets, namely, the cyclicalrelationship between stocks and commodities and the function of commodity and agribusinessindexes in portfolios. A high negative correlation has existed between stock and commodityprices over the past 140 years. Moreover, the two markets have alternated in priceleadership with 29–32-year cycles. The recent price dominance in agricultural commoditiesstarted in 2000, a result supported by the empirical results of the portfolio allocation analysis.For a risk-averse investor, irrespective of the period analyzed, placing funds in agribusinessand/or agricultural commodity indexes was sound investing.
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