 Global climate change and commodity markets: A hedging perspectiveShanghui Jia, Xinhui Chen, Liyan Han and Jiayu Jin Journal of Futures Markets, 2023, vol. 43, issue 10, 1393-1422 Abstract: This paper aims to measure the tail‐risk dependence between climate change and commodity futures markets. We utilize Morgan Stanley Capital International Climate Change Index (CCI) to serve as a proxy indicator of the stock market climate change for examining the tail‐risk spillover effect among 16 major commodity futures. Using GARCH–Copula–CoVaR framework, we show that extreme climate change has a significant tail‐risk spillover effect on commodity futures markets, in which agricultural and energy futures are affected by climate change most. We then adopt the copula‐based generalized autoregressive conditional heteroskedasticity (GARCH) model to compute the optimal hedge ratio among each pair of CCI with commodity futures, which performs well economic advantages for all 16 commodities. Compared with hedging against commodity index, CCI has a more significant hedging effect on metal and energy subindex futures. Therefore, we finally suggest an effective hedging portfolio composed of CCI and subindex futures in a significant economic sense. Date: 2023 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:43:y:2023:i:10:p:1393-1422 Ordering information: This journal article can be ordered from Access Statistics for this article Journal of Futures Markets is currently edited by Robert I. Webb More articles in Journal of Futures Markets from John Wiley & Sons, Ltd. |
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