Munich Personal RePEc Archive

Hedging China’s Energy Oil Market Risks

Su, Yongyang and Lau, Chi Keung Marco and Tan, Na (2013): Hedging China’s Energy Oil Market Risks.

[img]
Preview
PDF
MPRA_paper_47134.pdf

Download (528kB) | Preview

Abstract

This paper is the first study to examine the effectiveness of the Shanghai Fuel Oil Futures Contract (SHF) in risk reduction on the Chinese energy oil market. We find that the SHF contract can help investors reduce risk by approximately 45%, lower than empirical evidence in developed markets, when weekly data are applied. In contrast, when using daily data SHF contract can only help reduce risk by approximately 9%. The Tokyo Oil Futures Contract (TKF), however, performs two times better, reducing risk by around 17%. The empirical results are robust when variance complicated bivariate GARCH (BGARCH) and bivariate distributions are used. Our results imply the energy oil futures market in China is not well-established and further policy is needed to improve market efficiency.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.