The Fortune and crash of common risk factors in Chinese commodity markets

IF 3.7 4区经济学 Q1 BUSINESS, FINANCE Journal of Commodity Markets Pub Date : 2023-09-15 DOI:10.1016/j.jcomm.2023.100362

Hemei Li , Zhenya Liu , Yuqian Zhao

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Abstract

This paper investigates the performance of nine commonly discussed market anomalies in the Chinese commodity market. By studying a data sample from 2005 to 2020, we find the common risk factors associated with term structure and momentum anomalies effectively explain the cross-sectional excess returns and generate profitable sorting portfolios. Meanwhile, we empirically demonstrate that the term structure and momentum risk factors significantly crash during periods of high market stress, although they bring overall good outperformance in out-of-sample. We attribute these crashes to high time-varying volatility. Inspired by the augmented momentum crash strategy of Daniel and Moskowitz (2016), we construct augmented term structure and momentum risk factors to improve their performances in the Chinese commodity futures market. The out-of-sample Sharpe ratios of the term structure and momentum risk factors increase from 0.75 to 1.08 and from 0.66 to 0.77, respectively. In particular, both risk factors exhibit over 100% increments in out-of-sample Sharpe ratios during bear markets.

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中国大宗商品市场常见风险因素的兴衰

本文研究了中国商品市场中常见的九种市场异常的表现。通过研究2005 - 2020年的数据样本，我们发现与期限结构和动量异常相关的常见风险因素有效地解释了横截面超额收益，并产生了有利可图的分类投资组合。同时，我们实证证明期限结构和动量风险因素在高市场压力时期显著崩溃，尽管它们在样本外带来了整体良好的表现。我们将这些崩溃归因于高时变波动性。受Daniel和Moskowitz(2016)的增强型动量崩盘策略的启发，我们构建了增强型期限结构和动量风险因素，以提高它们在中国商品期货市场的表现。期限结构和动量风险因素的样本外夏普比率分别从0.75上升到1.08和从0.66上升到0.77。特别是，在熊市期间，这两个风险因素在样本外夏普比率上都表现出超过100%的增量。

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来源期刊

Journal of Commodity Markets Multiple-

CiteScore

5.70

自引率

2.40%

发文量

期刊介绍： The purpose of the journal is also to stimulate international dialog among academics, industry participants, traders, investors, and policymakers with mutual interests in commodity markets. The mandate for the journal is to present ongoing work within commodity economics and finance. Topics can be related to financialization of commodity markets; pricing, hedging, and risk analysis of commodity derivatives; risk premia in commodity markets; real option analysis for commodity project investment and production; portfolio allocation including commodities; forecasting in commodity markets; corporate finance for commodity-exposed corporations; econometric/statistical analysis of commodity markets; organization of commodity markets; regulation of commodity markets; local and global commodity trading; and commodity supply chains. Commodity markets in this context are energy markets (including renewables), metal markets, mineral markets, agricultural markets, livestock and fish markets, markets for weather derivatives, emission markets, shipping markets, water, and related markets. This interdisciplinary and trans-disciplinary journal will cover all commodity markets and is thus relevant for a broad audience. Commodity markets are not only of academic interest but also highly relevant for many practitioners, including asset managers, industrial managers, investment bankers, risk managers, and also policymakers in governments, central banks, and supranational institutions.