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    Diamonds and precious metals for reduction of Portfolio Tail Risk

    Barbi, M. and Geman, Hélyette and Romagnoli, S. (2020) Diamonds and precious metals for reduction of Portfolio Tail Risk. Applied Economics 52 (26), pp. 2841-2861. ISSN 0003-6846.

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    We study the performance of diamonds compared to gold and other precious metals in mitigating the tail risk of a diversified equity market portfolio over the period June 2007 to October 2018. Our results display a diversification benefit of some diamond indices, which also improve the portfolio reward-to-risk ratio. To corroborate this evidence, we study the dependence structure and tail dependence of diamonds and a broad equity market portfolio and compare it to the dependence obtained with gold and other precious metals. Results from fitting a bivariate copula show that the average left tail dependence reaches its minimum when diamonds are used. We also show that using shares of diamond-mining companies does not provide the same benefits.


    Item Type: Article
    Additional Information: This is an Accepted Manuscript of an article published by Taylor & Francis, available online at the link above.
    Keyword(s) / Subject(s): Diamonds, precious metals, diversification, Copula functions, tail dependence
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Research Centres and Institutes: Commodities Finance Centre
    Depositing User: Helyette Geman
    Date Deposited: 03 Mar 2020 11:09
    Last Modified: 02 Aug 2023 17:58


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