Research On The Commodity Futures' Effect On Risk Diversification

At present,with the rapid development of the world economy,the development of global finance has entered a new stage of trend growth,which are promoting the commodity futures an emerging derivatives tools developing rapidly in our country.Investors gradually tend to put commodity futures into the original portfolio when they are doing asset allocation.Commodity futures as a new risk management tool has entered into a new stage of development.Markovitz's security portfolio theory has said that the inclusion of a less relevant security into the traditional portfolio can reduce the risk of the portfolio.So,what is the relationship between commodity futures and the traditional assets? Can it effectively improve the investor utility?Many foreign literatures pointed out: In addition to the function of basic price discovery,avoiding price risk and hedging,commodity futures can also resist inflation and diversify investment risk,due to its unique financial properties,as well as the relationship with the spot.As a result,many foreign investors added commodity futures to traditional portfolios to optimize asset allocation,which has achieved remarkable results.However,as the domestic commodity futures started relatively late,the futures market is not mature enough.The articles that study the risk of commodity futures considering our own national conditions are limited.This paper attempts to study the relationship between commodity futures and traditional assets,and then compare the effect of risk diversification of commodity futures by comparing the changes of Sharpe ratio before and after adding commodity futures in the portfolio.In this paper,we use the MATLAB software to obtain time-varying dynamic correlation relationships among the stock market,the bond market and the futures market,which are represented by the gold,aluminum,copper,rubber futures contracts in Shanghai Futures Exchange,the cotton futures contracts in Zhengzhou Commodity Exchange,the corn,soybean futures contracts in Dalian Commodity Exchange,through the DCC-MVGARCH model.From the volatility of the time-dependent dynamic correlation coefficients and the long-term trend,the correlation among the two futures products such as Shanghai gold and corn,the stock market,the bond market is low.This paper makes an empirical test on the risk dispersion ability of commodity futures which shows the asset's ratio on condition that the risk-free rate of return is 0.004,which is based on the Markowitz's portfolio theory.This result can offer us a portfolio of investment strategy,when we put assets into stock,bonds and futures market.According to the empirical test,it is found that in the domestic market,if the risk-free rate of return is 0.004,the Sharpe ratio will be improved to some extent when sample quota will be added to the traditional portfolio after the combination of the sample futures.As a result,the Commodity futures can effectively diversify the portfolio risk and improve the effectiveness of the portfolio.Thus,from the perspective of investors diversifying investment risk and improving the efficiency of investment,it is of great practical significance to establish a mature and stable commodity futures market.