Energy Stocks as a Separate Portfolio Allocation

Abstract

This article examines energy stocks in the context of a diversified investment portfolio. Several factors—the importance of the energy sector, energy stocks’ potential to hedge energy risks, growing interest in real assets, as well as anecdotes of sophisticated investors focusing on energy investments—motivate this look at energy stocks. The author demonstrates that a separate allocation to energy stocks enhances portfolio efficiency and potentially hedges against inflation and inflation surprises.

TOPICS: Security analysis and valuation, commodities, performance measurement