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

Panos Fousekis*, Vasilis Grigoriadis

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)


Purpose: This paper aims to investigate empirically the linkages between stock and commodity futures markets. Design/methodology/approach: 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. Findings: 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. Originality/value: 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.

Original languageEnglish
Pages (from-to)183-206
Number of pages24
JournalStudies in Economics and Finance
Issue number2
Publication statusPublished - 24 Jun 2019
Externally publishedYes

Bibliographical note

Publisher Copyright:
© 2019, Emerald Publishing Limited.

Copyright 2019 Elsevier B.V., All rights reserved.


  • Asymmetry
  • Co-movement
  • Commodities
  • Copulas
  • Stock

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)


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