| Traditionally,stocks and bonds have asserted dominance over investment portfolios while commodities have usually been found in industry and consumption sectors.Since the 2000 s investors may include commodities in their financial portfolio with financial assets,such as stocks and foreign exchanges due to the empirically proven benefits of portfolio diversification.However,the rocketing prices of commodities,along with their increased volatility right after the involvement of financial activities,or financialization,imply a more intensified and complex correlation between two markets which used to have no or weak relationship,and shake the belief of portfolio diversification benefits.Therefore,this master’s thesis aims to investigate the relationships between commodity market,represented by crude oil price and financial market,composed of stock return and exchange rate.The sample data,i.e.WTI crude oil price,SSE Composite Index and the exchange rate of RMB per unit of USD,are taken daily from December 31,1993 to December 31,2020.They are respectively extracted from the US Energy Information Administration（EIA）official website,Shanghai Stock Exchange platform and Federal Reserve Economic Data.The empirical results reveal that the relationships between crude oil,stock prices and exchange rates do exist but depend on different periods of time.In detail,the correlation between crude oil and stock prices is the most volatile and generally negative before the financialization of the commodity market in the 2000 s and positive after that.Regarding the correlation between crude oil and exchange rate,the volatility is still witnessed but with apparently a smaller degree.As for the correlation of two financial market factor,i.e.stock prices and exchange rates,the correlation was totally negative for the whole sampling time,except the period from the beginning of the financialization of the commodity market to the pre-crisis 2008-2009 period. |
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