Swap Portfolios, Reverse-Weighted Portfolios, and the Efficiency of Commodity Futures Markets (original) (raw)
2020, arXiv: Mathematical Finance
A market portfolio is a portfolio in which each asset is held at a weight proportional to its market value. A swap portfolio is a portfolio in which each one of a pair of assets is held at a weight proportional to the market value of the other. A reverse-weighted index portfolio is a portfolio in which the weights of the market portfolio are swapped pairwise by rank. Swap portfolios are functionally generated, and in a coherent market they have higher asymptotic growth rates than the market portfolio. Although reverse-weighted portfolios with two or more pairs of assets are not functionally generated, in a market represented by a first-order model with symmetric variances, they will grow faster than the market portfolio. This result is applied to a market of commodity futures, where we show that the reverse price-weighted portfolio substantially outperforms the price-weighted portfolio from 1977-2018.
Related papers
Swap Portfolios and Reverse-Weighted Portfolios, with an Application to Commodity Futures
arXiv: Mathematical Finance, 2020
A market portfolio is a portfolio in which each asset is held at a weight proportional to its market value. A swap portfolio is a portfolio in which each one of a pair of assets is held at a weight proportional to the market value of the other. A reverse-weighted index portfolio is a portfolio in which the weights of the market portfolio are swapped pairwise by rank. Swap portfolios are functionally generated, and in a coherent market they have higher asymptotic growth rates than the market portfolio. Although reverse-weighted portfolios with two or more pairs of assets are not functionally generated, in a market represented by a first-order model with symmetric variances, they will grow faster than the market portfolio. This result is applied to a market of commodity futures.
Loading Preview
Sorry, preview is currently unavailable. You can download the paper by clicking the button above.