E3S Web Conf.
Volume 403, 2023XII International Scientific and Practical Forum “Environmentally Sustainable Cities and Settlements: Problems and Solutions” (ESCP-2023)
|Number of page(s)||8|
|Section||Development of Sustainable Cities: Economic, Social and Humanitarian Aspects|
|Published online||25 July 2023|
Estimating optimal hedging ratio and hedging efficiency in China's stock market
1 Southern Federal University, Rostov on Don, Russia.
2 Moscow State Institute of International Relations, Moscow, Russia.
1 Corresponding author: firstname.lastname@example.org
This paper examines the risk spillover mechanism between China's stock market and international commodity markets using selected industry data series on soybean copper, gold, silver, sugar, and crude oil. Based on the results of this analysis, a DCC-GARCH model is used to describe the dynamic correlation, build a risk hedging model, calculate the risk hedging efficiency, and evaluate the risk hedging effect. According to the findings, the industrial and optional consumer industries are the primary risk receiving markets, while the energy and finance industries are the primary risk export markets. The stock market crash in 2015 and the COVID-19 epidemic in 2020 made the risk spillover between China’s stock market and international commodity markets surge. On average, the commodity copper is the most efficient hedge, followed by silver, while commodities such as sugar, gold and soybeans are less effective, and copper will continue to be a good hedge for the Chinese stock market in the coming months.
Key words: International commodity market / Stock market / Spillover index / Spillover effect / Risk hedging
© The Authors, published by EDP Sciences, 2023
This is an Open Access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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