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Zeno Adams
Title
Dr.
Last Name
Adams
First name
Zeno
Email
zeno.adams@unisg.ch
Phone
+41 71 224 70 14
Skype
zeno.adams
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PublicationHave Commodities Become a Financial Asset? Evidence from Ten Years of FinancializationThe financialization of commodity markets over the last decade has changed the behavior of commodity prices in fundamental ways. In this paper, we uncover the gradual transformation of commodities from a physical to a financial asset. Although economic demand and supply factors continue to play an important role, recent indicators associated with financialization have emerged since 2008. We show that financial variables have become the main driving factors explaining the variation in commodity returns and volatility today. Our findings have important implications for portfolio analysis and for the effectiveness of hedging in commodity markets.Type: journal articleJournal: Energy EconomicsVolume: Volume 89, June 2020, 104769Issue: 89
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PublicationThe Predictive Power of Value-at-Risk Models in Commodity Futures MarketsApplying standard value-at-risk (VaR) models to assets with non-normally distributed returns can lead to an underestimation of the true risk. Commodity futures returns are driven by continuous supply and demand shocks that lead to a distinct pattern of time-varying volatility. As a result of these specific risk characteristics, commodity returns create the ideal environment for testing the accuracy of VaR models. Therefore, this article examines the in- and out-of-sample performance of various VaR approaches for commodity futures investments. Our results suggest that dynamic VaR models such as the CAViaR and the GARCH-type VaR generally outperform traditional VaRs. These models can adequately incorporate the time-varying volatility of commodity returns, and are sensitive to significant changes in the series of commodity returns. This has important implications for the risk management of portfolios involving commodity futures positions. Risk managers willing to familiarize themselves with these complex models are rewarded with a VaR that shows the adequate level of risk even under extreme and rapidly changing market conditions, as well as under calm market periods, during which excessive capital reserves would lead to unnecessary opportunity costs.Type: journal articleJournal: Journal of Asset ManagementVolume: 11Issue: 4DOI: 10.1057/jam.2009.21
Scopus© Citations 24 -
PublicationFinancialization in Commodity Markets: A Passing Trend or the New Normal?In this paper, we show that large inflows into commodity investments, a recent phenomenon known as financialization, has changed the behavior and dependence structure between commodities and the general stock market. The common perception is that the increase in comovements is the result of distressed investors selling both assets during the 2007-2009 financial crisis. We show that financial distress alone cannot explain the size and persistence of comovements. Instead, we argue that commodities have become an investment style for institutional investors. Given that institutional investors continue to target funds into commodities, we predict spillovers between commodities and the stock market to remain high in the future.