Dependence of stock and commodity futures markets in China: Implications for portfolio investment
Duc Khuong Nguyen,
Juan Reboredo () and
Emerging Markets Review, 2014, vol. 21, issue C, 183-200
We examine the recent trends in dependence structure between the fast-growing commodity markets and the stock markets in China. We address this issue by using copula functions that allow for measuring both average and tail dependence. Our results provide evidence of low and positive correlations between these markets, suggesting that commodity futures are a desirable asset class for portfolio diversification. By comparing the market risks of alternative portfolio strategies, we show that Chinese investors can take advantage of commodity futures during different times to realize risk diversification and downside risk reduction benefits.
Keywords: China; Commodity futures; Equity markets; Co-movement; Copulas; Portfolio risk management (search for similar items in EconPapers)
JEL-codes: C52 G11 G15 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:21:y:2014:i:c:p:183-200
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