We study the performance of diamonds compared to gold and other precious metals in mitigating the tail risk of a diversified equity market portfolio over the period June 2007 to October 2018. Our results display a diversification benefit of some diamond indices, which also improve the portfolio reward-to-risk ratio. To corroborate this evidence, we study the dependence structure and tail dependence of diamonds and a broad equity market portfolio and compare it to the dependence obtained with gold and other precious metals. Results from fitting a bivariate copula show that the average left tail dependence reaches its minimum when diamonds are used. We also show that using shares of diamond-mining companies does not provide the same benefits.

Diamonds and Precious Metals for Reduction of Portfolio Tail Risk / Barbi, M.; Geman, H.; Romagnoli, S.;. - In: APPLIED ECONOMICS. - ISSN 0003-6846. - STAMPA. - 52:26(2020), pp. 2841-2861. [10.1080/00036846.2019.1696938]

Diamonds and Precious Metals for Reduction of Portfolio Tail Risk

Barbi, M.;Romagnoli, S.
2020

Abstract

We study the performance of diamonds compared to gold and other precious metals in mitigating the tail risk of a diversified equity market portfolio over the period June 2007 to October 2018. Our results display a diversification benefit of some diamond indices, which also improve the portfolio reward-to-risk ratio. To corroborate this evidence, we study the dependence structure and tail dependence of diamonds and a broad equity market portfolio and compare it to the dependence obtained with gold and other precious metals. Results from fitting a bivariate copula show that the average left tail dependence reaches its minimum when diamonds are used. We also show that using shares of diamond-mining companies does not provide the same benefits.
2020
Diamonds and Precious Metals for Reduction of Portfolio Tail Risk / Barbi, M.; Geman, H.; Romagnoli, S.;. - In: APPLIED ECONOMICS. - ISSN 0003-6846. - STAMPA. - 52:26(2020), pp. 2841-2861. [10.1080/00036846.2019.1696938]
Barbi, M.; Geman, H.; Romagnoli, S.;
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/706198
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