A Markowitz Optimization of Commodity Futures Portfolios

摘要

We examine the diversification benefits of using individual futures contracts instead of simply a commodity index. We determine the ex-ante, ex-post, and stability results for optimal Markowitz portfolios, investigate the instability between the ex-ante and ex-post results, and compare our results to traditional and naive portfolios. The ex-ante complete futures portfolio dominates the traditional and naive portfolios and the ex-post portfolio outperforms the naive portfolio. The instability between the ex-ante and ex-post results is primarily driven by the time-varying returns of the individual assets rather than by risk. Finally, the Sharpe portfolio results are essentially identical to the Markowitz results.