Dependent relationships between Chinese commodity markets and the international financial market: Evidence from quantile time-frequency analysis |
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| Institution: | 1. College of Business Administration, Hunan University, Changsha 410082, China;2. Ningbo lnstitute of Technology, ZheJiang University, Ningbo 315100, China;1. Åbo Akademi University, Faculty of Social Sciences, Business and Economics, Asa Vänrikinkatu 3 B, Turku, Finland;2. North South University, School of Business and Economics, Dhaka, Bangladesh;3. Iowa State University, Department of Economics, 468J Heady Hall, Ames, IA 50011, USA;4. Doane University, College of Business, 411 Gaylord Hall, 1014 Boswell Ave, Crete, NE 68333, USA;1. University of Sfax, Faculté des Sciences Economiques et de Gestion, GFC Laboratory, Route de l''Aérodrome km 04, Sfax 3018, Tunisia;2. University of Sfax, Institut des Hautes Etudes Commerciales, MODEOR Laboratory, Route Sidi Mansour Km 10, Sidi Mansour 3061 Sfax, Tunisia;3. Institute for Quantum Science and Engineering, Texas A&M University, College Station, TX 77843, USA;4. Department of Applied Sciences and Mathematics, College of Arts and Sciences, Abu Dhabi University, Abu Dhabi, UAE;5. College of Business, Abu Dhabi University, P.O. Box 59911, Abu Dhabi, United Arab Emirates;6. Oxford Center for Islamic Studies, The University of Oxford, Marston Road, Oxford OX3 0EE, UK;7. The University of Liverpool Management School, The University of Liverpool, Chatham Building, Chatham Street, Liverpool L69 7ZH, UK;1. School of Finance, Zhongnan University of Economics and Law, 182 Nanhu Avenue, East Lake High-tech Development Zone, Wuhan 430-073, PR China;2. Research Center of Finance, Shanghai Business School, 2271 West Zhongshan Road, Shanghai 200235, PR China;3. School of Business, East China University of Science and Technology, 130 Meilong Road, Xuhui District, Shanghai 200-237, PR China;4. School of Public Administration, South China Normal University, Guangzhou Higher Education Mega Center, Guangzhou 510-006, PR China;5. Faculty of Economics, Kobe University, 2-1, Rokkodai, Nadaku, Kobe 657-8501, Japan;1. Department of Safety, Economics and Planning, University of Stavanger, Norway;2. Management Development Institute Gurgaon, Gurugram 122001, India;3. International Management Institute New Delhi, New Delhi 110016, India;4. School of Accounting and Finance, University of Vaasa, Finland;5. Department of Management and Engineering, Linköping University, Linköping, Sweden |
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| Abstract: | In this article, the quantile time–frequency method is utilized to study the dependence of Chinese commodities on the international financial market. The impacts of risk management and diversification benefits of different portfolios are examined by calculating the reduction in downside risk. Moreover, we estimate and compare Sharpe Ratios (SRs) and Generalized Sharpe Ratios (GSRs) based on the frequencies of the investigated portfolios. Our empirical results reveal a strong asymmetric response from Chinese commodity markets. Specifically, we find that gold is a safe-haven asset, and due to negative correlations found at lower quantiles in medium and long term, an increase in the USD index damages bull commodity markets but boosts bear conditions under long-term investments, and negative (positive) tail correlations with interest rates (IRs) in bull (bear) markets are observed. It is proven that WTI can decrease short-run risks while USD and GOLD are more efficient in the diversification of downside risk. Adding international commodities may not improve the returns of Chinese commodities at given risk levels in the short and medium term through SRs and GSRs. In brief, investors should consider these dependence structures and modes of risk management in terms of time and frequency. |
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| Keywords: | Dependence Commodity market International financial market Quantile regression Wavelet analysis China |
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