They’re Back! Post-financialization Diversification Benefits of Commodities

Chinese jigsaw: Solving the equity market response to the COVID-19 crisis: Do alternative asset provide effective hedging performance?

“…The empirical findings in Akhtaruzzaman et al (2020a , b ) show strong evidence of contagion effects between China, Japan, and the G7 markets. Gagnon et al (2020) conclude that an unrecorded decrease follows the COVID-19 crisis in interest rates. In such a context, commodities-based diversification can be more useful for investors.…”

Price overreactions in the commodity futures market: An intraday analysis of the Covid-19 pandemic impact

“…On the other hand, Bianchi et al (2020) state that this financialization is cyclable as they also observe a de-financialization of metals and agricultural markets from 2014 to 2017. Furthermore, Gagnon et al (2020) demonstrate that the most-financialization period offers new diversification opportunities for commodities in Canada. Adams et al (2020) show that financial variables become the main driving factors of commodities’ returns and volatility.…”

Safe-haven properties of soft commodities during times of Covid-19

“…Some existing studies ( Bodie and Rosansky, 1980 ; Conover et al, 2009 ; Daskalaki and Skiadopoulos, 2011 ; Daskalaki et al, 2017 ; Ji et al, 2020 ) support the view that equity investors can achieve diversification benefits by including commodities in their portfolios. Prior literature also reports that commodities futures offer diversification benefits to the risk averse equity investors because of their negative correlation with equities ( Cai et al, 2020 ; Conover et al, 2010 ; Gagnon et al, 2020 ; Gorton and Rouwenhorst, 2006 ). The commodity is the class of assets that provides positive returns to equity investors during crisis and can offset their accumulated losses from investments in the equity markets.…”