Research On The Investment Value Of Domestic Commodity Futures

Benefiting from the rapid growth of national economy, China’s futures marketshas been increasingly mature and leaped from the quantitative change to thequalitative change. With the growth of institutional investors and the increase ofnational income per capita, commodity futures are frequently appearing in investors’portfolios, and commodity futures’ financial attribute are obvious more and more. So,can commodity investments improve investors’ utility? What is the composition ofoptimal portfolio including those commodity futures and other asset classes? We aredevoting ourselves to answering these questions, so that to provide useful informationfor investors to make scientific investment decisions.Based on the reference from previous literature in research methods and resultsin Chapter2, we test whether the commodity index funds and commodity futurescontracts are the spanning of traditional portfolios including stocks and bonds inChapter3to answer the basic question above initially. In Chapter4, we are toconstruct the optimal portfolio consisting of commodity futures only in the generalmean-variance framework, taking the risk-less assets and allowing the investors toborrow capital for investing. We investigate the effect of the introduction ofcommodity index funds and commodity futures on the efficient frontier of traditionalportfolios to compare the portfolio’sperformance between before and after containingthe commodity assets directly and visually. The effect of risk aversion on thecomposition of optimal portfolio is also investigated. Chapter6concludes with asummary and prospects the future study.After the empirical analysis using the data from the stock markets, bond markets,commodity futures markets in China, we can draw several main conclusions asfollows: first, results from the spanning tests aren’t in favor of investment incommodity futures. Investors cannot get additional value from it. Second, the weightsof various kinds of commodity futures vary greatly in the optimal portfolio consistingof only commodity futures under the mean-variance framework. However, opposingsome restrictions on the weights of these kinds of commodity futures can lower theportfolio risks substantially. Third, the introduction of commodity index fundsdon’tmove the efficient frontier of traditional portfolio made up of stocks and bonds, butthe addition of commodity futures into the portfolio one by one can rise the frontiergradually. Fourth, when considering the risk aversion, offensive investors can benefitfrom commodity investments by increasing the risk value, while, conservative investors can’t.