Downside Risk and Risk-Adjusted Performances of Industrial Metals

Živkov, Dejan and Manić, Slavica and Glamočlija Gajić, Marina (2024) Downside Risk and Risk-Adjusted Performances of Industrial Metals. Economic Computation and Economic Cybernetics Studies and Research, 58 (1). pp. 138-152. ISSN 0424-267X

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Abstract

This paper investigates the level of risk and the risk-adjusted returns of five industrial metals. In the research process, we use several sophisticated approaches – EGARCH-NIG model, parametric and semiparametric CVaR risk measures, and four returnto-risk ratios. Aluminium has the lowest parametric CVaR at all probabilities, whereas lead has the upper hand in semiparametric CVaR. This happens because lead has the highest positive skewness and the lowest kurtosis. However, the riskiest metal is tin because of the highest negative skewness and highest kurtosis. As for the calculated ratios, copper is the best metal in the three out of four cases (Sharpe, Sortino, and modified STARR), primarily because copper recorded the highest price rise in the observed period. Aluminium has the best Treynor ratio because of the relatively low beta and the relatively high mean, whereas lead can serve as a good auxiliary instrument in combination with the S&P500 index due to the lowest beta.

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