The Portfolio Investment Value Of Commodity Futures On Chinese Market

ABSTRACT:The commodity futures on Chinese market are prepared to take on added importance in portfolio investments with the deepening of financial innovation and the opening of CTAs. Yet before the commodity futures are in practice introduced into the position of portfolio investments, basically investors need to get familiar with some of their nature. This paper is design to study the portfolio investment value of commodity futures with perspective of diversification gain and inflation protection. By utilizing DCC-MVGARCH model and EMD method, this paper firstly studies the dynamic correlation between4single commodity futures and the traditional assets. In detail, the SHFE copper, SHFE aluminum, DCE soymeal and SHFE rubber are specified and2indexes are selected representing overall performance of stocks and bonds respectively. Following that, by employ the classical model as well as an augmented model which considered RMB real exchange rate factor, the function of inflation protection is tested based on each commodity futures where.The result shows:except for DCE soymeal, the rest three selected commodity futures display a systematic upward movement on the correlations with stocks. All the commodities futures are however weakly correlated with bonds all the time. On the other side, all the4commodity futures are eligible for hedging expected inflation while only SHFE copper and DCE soymeal are capable of unexpected inflation protection. Finally, the paper comes to investment advices based the analysis of empirical results.