An anatomy of commodity futures returns in China

Xuan Zhang, Jun Xiao and Zhekai Zhang

Pacific-Basin Finance Journal, 2020, vol. 62, issue C

Abstract: We provide a broad empirical analysis for cross-sectional excess returns in the Chinese commodity futures market. We find two commodity futures strategies, the carry and the momentum, provide significant returns. These two factors, along with a commodity average factor, explain most cross-sectional variations in the Chinese commodity futures market. We then discuss economic interpretations for commodity carry and momentum in China in comparison with their US counterparts. We show that commodity carry in China provides a lower return than the one in the US because it is not compensated by the equity volatility innovation risk. The commodity momentum in China is closely related to the individual investors' behavioural bias of herding effects in the Chinese equity market.

Keywords: Asset pricing; Chinese commodity futures; Carry; Momentum; Equity volatility innovations; Herding effects (search for similar items in EconPapers)
JEL-codes: G12 G13 Q02 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:62:y:2020:i:c:s0927538x20301086

DOI: 10.1016/j.pacfin.2020.101366

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