Study of international commodity assets industry allocation strategy

This paper proposes an international commodity assets industry allocation model under Black-Litterman framework, which taking consideration of information spillover effect originated from exogenous financial markets on to commodities markets and long-term memory characteristics of commodities. Empirical experiments on daily data of DJ-UBS commodity sub-indices show that the proposed industrial allocation strategy provides a systematic and robust way to achieve the optimal trade-off between profitability and risk-aversion, and the realized returns are better than traditional strategies based on market equilibrium weights or the Markowitz framework. It demonstrates that this model provides a great support and experience for active management of international commodity investment with comprehensive consideration of safety, liquidity and profitability, therefore to guarantee international reserves and national economy security.