Journal
EMERGING MARKETS REVIEW
Volume 21, Issue -, Pages 183-200Publisher
ELSEVIER
DOI: 10.1016/j.ememar.2014.09.002
Keywords
China; Commodity futures; Equity markets; Co-movement; Copulas; Portfolio risk management
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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. (C) 2014 Elsevier B.V. All rights reserved.
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