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The Journal of Alternative Investments

The Journal of Alternative Investments

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Primary Article

“Black Gold”—Trading Crude Oil for Greater Portfolio Efficiency

A Comparison with Commodity Indices

Mark S Rzepczynski, Cengiz Y. Belentepe, Wei Feng and Philip Lipsky
The Journal of Alternative Investments Fall 2004, 7 (2) 44-50; DOI: https://doi.org/10.3905/jai.2004.439643
Mark S Rzepczynski
President and chief investment officer of John W. Henry & Co. Inc. in Boca Raton, FL.
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  • For correspondence: mark_rzepczynski@jwhmail.com
Cengiz Y. Belentepe
A PhD student in the Department of Statistics at The Wharton School, University of Pennsylvania, in Philadelphia, PA.
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  • For correspondence: cengiz@wharton.upenn.edu
Wei Feng
A research analyst at John W. Henry & Co. Inc.
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  • For correspondence: wei_feng@jwhmail.com
Philip Lipsky
A research analyst at John W. Henry & Co. Inc.
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  • For correspondence: philip_lipsky@jwhmail.com
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Abstract

Commodity markets have proven to be a significant portfolio diversifying asset. However, little work has been conducted as to the statistical significance of this addition. We compare the addition of a commodity index to a traditional portfolio of stocks and bonds against the alternative of adding crude oil futures to serve as a commodity diversifier. We find that the value of such a simplification may be significant. By reducing the number of commodities used to gain portfolio diversification, investors may gain liquidity and flexibility. We run a similar test for gold which has been considered a key commodity diversifier during the inflationary periods of the 1970s and 1980s.

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The Journal of Alternative Investments
Vol. 7, Issue 2
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“Black Gold”—Trading Crude Oil for Greater Portfolio Efficiency
Mark S Rzepczynski, Cengiz Y. Belentepe, Wei Feng, Philip Lipsky
The Journal of Alternative Investments Sep 2004, 7 (2) 44-50; DOI: 10.3905/jai.2004.439643

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“Black Gold”—Trading Crude Oil for Greater Portfolio Efficiency
Mark S Rzepczynski, Cengiz Y. Belentepe, Wei Feng, Philip Lipsky
The Journal of Alternative Investments Sep 2004, 7 (2) 44-50; DOI: 10.3905/jai.2004.439643
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