Unprofitability of food market investments

Abstract

Using more than two decades of disaggregated return data, we provide a comprehensive study of the investment benefits offered by food futures. In addition to comparing them to established passive and active investment vehicles, we investigate whether diversified investors can capitalize on including food futures into their portfolios. Our analysis is conducted within traditional and modern mean‐risk portfolio frameworks (measuring risk in terms of variance and tail size, respectively) supplemented by robust resampling techniques. Reward‐to‐risk investment performance is evaluated out of sample and by means of state‐of‐the‐art bootstrap testing. Overall, we find that food futures neither surpass standalone investments in stock, bond, and nonfood commodity markets nor do they significantly improve optimized multi‐asset portfolios.