EVALUATING WHEAT HEDGING EFFICIENCY USING PRECIOUS METALS: A PORTFOLIO ANALYSIS FROM VOJVODINA

Abstract

This study analyzes the effectiveness of hedging wheat in Vojvodina, Serbia, using gold and silver to reduce portfolio risk and stabilize returns. Wheat is a key regional commodity, highly sensitive to global price fluctuations and local market conditions. Daily CBOT wheat futures and historical gold and silver prices from 2019–2024 are used to calculate log returns. Minimum-variance portfolios are constructed following the Markowitz framework. Hedging efficiency is measured with the Hedge Effectiveness Index (HEI) and risk-adjusted performance with the Sharpe ratio. Results show that hedging with gold provides the highest risk reduction (HEI 94.38%, Sharpe 0.2025), while silver offers moderate protection (HEI 87.40%, Sharpe 0.0456). These findings demonstrate that precious metals effectively stabilize wheat portfolios and improve the risk–return trade-off. The study highlights practical implications for producers and investors in Vojvodina, enabling portfolio protection against price volatility. Future research could extend the analysis to other Western Balkan countries, additional commodities, and futures contracts.