Co-Integration and Causality between Equity and Commodity Futures: Implications for Portfolio Diversification

Co-Integration and Causality between Equity and Commodity Futures: Implications for Portfolio Diversification

Y. Bansal

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S. Kumar

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P. Verma

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Thapar Institute of Engineering & Technology

Co-Integration and Causality between Equity and Commodity Futures: Implications for Portfolio Diversification

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Abstract

This paper examines the long term statistical relationship of commodity future prices with equity prices using various tools including Augmented Dickey Fuller Test, Vector Auto Regression and Johansen’s Cointegration technique. The paper also investigates the short term dynamics of prices by testing for the existence and direction of inter-temporal Granger-causality between the indices. The analysis shows that there is no long term cointegration between the commodity future prices and equity prices therefore, an investor with long term investment horizon would benefit by including commodity futures to a traditional portfolio.

References

18 Cites in Article

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Y. Bansal. 2014. \u201cCo-Integration and Causality between Equity and Commodity Futures: Implications for Portfolio Diversification\u201d. Global Journal of Management and Business Research - C: Finance GJMBR-C Volume 14 (GJMBR Volume 14 Issue C5).

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GJMBR Volume 14 Issue C5

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Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

Keywords

Causality cointegration commodity futures Equity portfolio diversification

Submission ReceivedDecember 10, 2013
Peer Review Double Blind
Handling Editor
Accepted January 5, 2014
Published January 15, 2014

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v1.2

Issue date

October 1, 2014

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Article Matrices

Total Score: 103

Country: India

Subject: Global Journal of Management and Business Research - C: Finance

Authors: Y. Bansal, S. Kumar, P. Verma (PhD/Dr. count: 0)

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Total Views: 4419

Total Downloads: 2132

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