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Mongolian mineral export basket risk: A Portfolio theory approach

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  • Puntsag, Davgadorj

Abstract

This paper explores one of the most prominent contemporary macroeconomic risks many commodity-exporting countries are facing today at the stage of their development and provides recommendations to reduce them. Uncertainty of mineral export commodities’ price fluctuations affect instability in export earnings and lead to fiscal and balance of payments deficits. However, for the country that depends on a basket of commodities, the volatility can be moderated if there is so-called a portfolio effect; that is if price fluctuations of such commodities offset with each other. In this paper, minerals are considered as risky assets to apply the Modern Portfolio Theory (MPT) and Mongolian mineral export basket is studied as a case study. In 2018, the export revenue share of Mongolian mineral export commodities has reached 87 per cent of total export. Especially during the last few years, coal, one of the most price volatile commodity, is dominating in its total export basket. As a result of this paper, there is a little room to improve the current export mix by adjusting the value weight of each commodity according to their contribution to overall portfolio risk and return.

Suggested Citation

  • Puntsag, Davgadorj, 2020. "Mongolian mineral export basket risk: A Portfolio theory approach," Resources Policy, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:jrpoli:v:68:y:2020:i:c:s0301420719304854
    DOI: 10.1016/j.resourpol.2020.101691
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    References listed on IDEAS

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    1. Olivier Massol & Albert Banal-Estañol, 2011. "Export diversification and resource-based industrialization : the case of natural gas," Working Papers hal-01031565, HAL.
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    4. Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, March.
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    Cited by:

    1. Oleg S. Sukharev, 2020. "Portfolio Theory in Solving the Problem Structural Choice," JRFM, MDPI, vol. 13(9), pages 1-21, September.
    2. Wang, Bo & Yang, Haoting & Tian, Wenjuan & Bi, Chunyu, 2023. "Determinants of trade of mineral resources between China and ASEAN," Resources Policy, Elsevier, vol. 85(PB).
    3. Spyridon D. Mourtas & Vasilios N. Katsikis, 2022. "V-Shaped BAS: Applications on Large Portfolios Selection Problem," Computational Economics, Springer;Society for Computational Economics, vol. 60(4), pages 1353-1373, December.

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    More about this item

    Keywords

    Mongolian mineral export; Mean-variance analysis; Export diversification;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade

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