Can investors of Chinese energy stocks benefit from diversification into commodity futures?
Xiaoqian Wen and
Duc Khuong Nguyen
Economic Modelling, 2017, vol. 66, issue C, 184-200
We attempt to evaluate the diversification potential of commodity futures for energy stocks in China. With a variety of copula functions and three risk-based dynamic measures, our results show that even though commodity futures are not helpful in improving the risk-adjusted returns of energy stocks, they can significantly reduce the volatilities and expected-shortfalls of the diversified portfolios. Such diversification benefits are much larger during large market downturns than during normal times. In particular, gold (copper) futures are the most (least) attractive in diversifying risks of energy stocks in most cases. The results also highlight that the non-linear dependence cannot be ignored when estimating the diversification benefits, and more various risk hedging strategies are expected for investors holding energy stocks, especially coal company stocks.
Keywords: Energy stocks; Commodity futures; Diversification benefits; Copulas; China (search for similar items in EconPapers)
JEL-codes: C51 G11 Q43 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:66:y:2017:i:c:p:184-200
Access Statistics for this article
Economic Modelling is currently edited by S. Hall and P. Pauly
More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().