@article {Smimou36, author = {K. Smimou}, title = {Stock Market and Agricultural Futures Diversification: An International Perspective }, volume = {12}, number = {4}, pages = {36--57}, year = {2010}, doi = {10.3905/JAI.2010.12.4.036}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Academic and practitioner research has presented strong evidence in support of the addition of commodity futures contracts to a diversified stock portfolio to enhance the risk-return characteristics of the portfolio. Moreover, it is well documented that diversification among risky assets in a particular country leads to risk reduction, but the potential gains are limited due to high correlations within an economy. Therefore, international portfolio diversification, primarily in stocks and bonds, has been advocated as a way of enhancing average returns while reducing portfolio risk for an investor who may consider holding foreign securities. This article expands on this initial conjecture by adding foreign agricultural futures contracts to the international dimension. The findings lend support to the arguments in favor of international diversification of agricultural commodities and present results on the long-term, historical risks and returns of agri-commodity futures and their relationship to the risks of other equity assets. Furthermore, since correlation stability is crucial to the size of the potential benefits from such diversification, additional insights into the inter-temporal stability of international return correlations are discussed.TOPICS: Commodities, futures and forward contracts, portfolio construction, performance measurement}, issn = {1520-3255}, URL = {https://jai.pm-research.com/content/12/4/36}, eprint = {https://jai.pm-research.com/content/12/4/36.full.pdf}, journal = {The Journal of Alternative Investments} }