Optimal Asset Allocation for Commodity Sovereign Wealth Funds

Publikation: Working paperForskning

Standard

Optimal Asset Allocation for Commodity Sovereign Wealth Funds. / Irarrazabal, Alfonso; Ma, Lin; Parra-Alvarez, Juan Carlos.

Aarhus : Institut for Økonomi, Aarhus Universitet, 2020.

Publikation: Working paperForskning

Harvard

Irarrazabal, A, Ma, L & Parra-Alvarez, JC 2020 'Optimal Asset Allocation for Commodity Sovereign Wealth Funds' Institut for Økonomi, Aarhus Universitet, Aarhus.

APA

Irarrazabal, A., Ma, L., & Parra-Alvarez, J. C. (2020). Optimal Asset Allocation for Commodity Sovereign Wealth Funds. Institut for Økonomi, Aarhus Universitet. CREATES Research Papers, Nr. 2020-10

CBE

Irarrazabal A, Ma L, Parra-Alvarez JC. 2020. Optimal Asset Allocation for Commodity Sovereign Wealth Funds. Aarhus: Institut for Økonomi, Aarhus Universitet.

MLA

Irarrazabal, Alfonso, Lin Ma, og Juan Carlos Parra-Alvarez Optimal Asset Allocation for Commodity Sovereign Wealth Funds. Aarhus: Institut for Økonomi, Aarhus Universitet. (CREATES Research Papers; Journal nr. 2020-10). 2020., 49 s.

Vancouver

Irarrazabal A, Ma L, Parra-Alvarez JC. Optimal Asset Allocation for Commodity Sovereign Wealth Funds. Aarhus: Institut for Økonomi, Aarhus Universitet. 2020 aug.

Author

Irarrazabal, Alfonso ; Ma, Lin ; Parra-Alvarez, Juan Carlos. / Optimal Asset Allocation for Commodity Sovereign Wealth Funds. Aarhus : Institut for Økonomi, Aarhus Universitet, 2020. (CREATES Research Papers; Nr. 2020-10).

Bibtex

@techreport{4ba9478b86ea440ca1ea6182f73b1c89,
title = "Optimal Asset Allocation for Commodity Sovereign Wealth Funds",
abstract = "This paper studies the dynamic asset allocation problem faced by an infinitively-lived commodity-based sovereign wealth fund under incomplete markets. Since the non-tradable stream of commodity revenues is finite, the optimal consumption and investment strategies are time dependent. Using data from the Norwegian Petroleum Fund, we find that the optimal demand for equity should decrease gradually from 60 to 40 percent over the next 60 years. However, the solution is particularly sensitive to the correlation between oil and stock price changes. We also estimate wealth-equivalent welfare losses, relative to the optimal rule, when following alternative suboptimal investment rules.",
keywords = "Optimal asset allocation, Sovereign wealth fund, Commodities, Income risk, Suboptimal investments",
author = "Alfonso Irarrazabal and Lin Ma and Parra-Alvarez, {Juan Carlos}",
year = "2020",
month = aug,
language = "English",
series = "CREATES Research Papers",
publisher = "Institut for {\O}konomi, Aarhus Universitet",
number = "2020-10",
type = "WorkingPaper",
institution = "Institut for {\O}konomi, Aarhus Universitet",

}

RIS

TY - UNPB

T1 - Optimal Asset Allocation for Commodity Sovereign Wealth Funds

AU - Irarrazabal, Alfonso

AU - Ma, Lin

AU - Parra-Alvarez, Juan Carlos

PY - 2020/8

Y1 - 2020/8

N2 - This paper studies the dynamic asset allocation problem faced by an infinitively-lived commodity-based sovereign wealth fund under incomplete markets. Since the non-tradable stream of commodity revenues is finite, the optimal consumption and investment strategies are time dependent. Using data from the Norwegian Petroleum Fund, we find that the optimal demand for equity should decrease gradually from 60 to 40 percent over the next 60 years. However, the solution is particularly sensitive to the correlation between oil and stock price changes. We also estimate wealth-equivalent welfare losses, relative to the optimal rule, when following alternative suboptimal investment rules.

AB - This paper studies the dynamic asset allocation problem faced by an infinitively-lived commodity-based sovereign wealth fund under incomplete markets. Since the non-tradable stream of commodity revenues is finite, the optimal consumption and investment strategies are time dependent. Using data from the Norwegian Petroleum Fund, we find that the optimal demand for equity should decrease gradually from 60 to 40 percent over the next 60 years. However, the solution is particularly sensitive to the correlation between oil and stock price changes. We also estimate wealth-equivalent welfare losses, relative to the optimal rule, when following alternative suboptimal investment rules.

KW - Optimal asset allocation

KW - Sovereign wealth fund

KW - Commodities

KW - Income risk

KW - Suboptimal investments

M3 - Working paper

T3 - CREATES Research Papers

BT - Optimal Asset Allocation for Commodity Sovereign Wealth Funds

PB - Institut for Økonomi, Aarhus Universitet

CY - Aarhus

ER -