How well can investors diversify with commodities? Evidence from a flexible copula approach

Panos Fousekis (Department of Economics, Aristotle University of Thessaloniki, Thessaloniki, Greece)
Vasilis Grigoriadis (Aristotle University of Thessaloniki, Thessaloniki, Greece)

Studies in Economics and Finance

ISSN: 1086-7376

Publication date: 24 June 2019



This paper aims to investigate empirically the linkages between stock and commodity futures markets.


It involves the application of a flexible copula approach to weekly total returns from the S&P 500 index and from three commodity sub-indices (agriculture, metals and energy) from 1995 to 2017.


Co-movement is by no means frequent and symmetric. It was predominantly zero before the last financial crisis, and since then, it is positive and asymmetric. The pattern of asymmetry is consistent with transmission of shocks under extreme negative shocks only. Recently, total returns of commodity futures are very poor. At the same time, commodity futures markets move in step (out of step) with stock markets when the latter plunge (rise), pointing to limited diversification benefits. These appear to justify the concerns of investors and researchers whether including commodities in a portfolio of assets is still a prudent investment strategy.


It is the only manuscript that combines a flexible copula approach and co-movement measurement along both the positive and negative diagonals. The findings are in sharp contrast with those reported by Delatte and Lopez (2013) and are very important for portfolio management.



Fousekis, P. and Grigoriadis, V. (2019), "How well can investors diversify with commodities? Evidence from a flexible copula approach", Studies in Economics and Finance, Vol. 36 No. 2, pp. 183-206.

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