Abstract
In this article, the authors note how a set of active commodity strategies could potentially add value to an investor's commodity allocation. But they also emphasize the due care that must be taken in risk management and implementation discipline, given the “violence of the fluctuations which normally affect the prices of many … commodities,” as Keynes [1934] put it. They take it as a given that a prudent investor should include commodities in their overall asset allocation mix. As Greer [2005] has noted, the benefits of commodity indexes include positive correlation to inflation as well as positive correlation to changes in the rate of inflation. Commodity indexes can also potentially perform well during a number of adverse economic surprises that are harmful to investments in stocks and bonds.
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