Mineral and fossil fuel extraction policies: A diversified portfolio approach to managing price volatility

Abstract

This study analyses the effectiveness of a diversified portfolio approach to managing price volatility in the mineral and fossil fuel industries of China and Russia. The study examines the performance of a portfolio consisting of multiple minerals, metals and fossil fuels, and compares it to the performance of individual commodities, with the goal of determining whether a diversified approach can effectively reduce volatility and increase returns. This study analyses data from the year 2000 to 2020, a period characterised by significant fluctuations in mineral and fossil fuel prices owing to global economic factors, geopolitical tensions, and technological innovations. This study focuses on China and Russia, regions with significant mineral and fossil fuel reserves, and a history of volatility in commodity prices. The study finds that a diversified portfolio approach can effectively reduce volatility in the mineral and fossil fuel markets, leading to increased returns for investors. A portfolio consisting of multiple minerals and fossil fuels exhibits lower volatility and higher returns than a portfolio consisting of individual commodities. These findings suggest that a diversified portfolio approach is an effective strategy for managing price volatility in the mineral and fossil fuel industries in China and Russia.