Global climate change and commodity markets: A hedging perspective
用GARCH-Copula-CoVaR方法研究气候变化指数与16种商品期货之间的尾部风险溢出，发现农业和能源期货受气候变化影响最大，并基于此构建了有效的对冲组合。
Abstract This paper aims to measure the tail‐risk dependence between climate change and commodity futures markets. We utilize Morgan Stanley Capital International Climate Change Index (CCI) to serve as a proxy indicator of the stock market climate change for examining the tail‐risk spillover effect among 16 major commodity futures. Using GARCH–Copula–CoVaR framework, we show that extreme climate change has a significant tail‐risk spillover effect on commodity futures markets, in which agricultural and energy futures are affected by climate change most. We then adopt the copula‐based generalized autoregressive conditional heteroskedasticity (GARCH) model to compute the optimal hedge ratio among each pair of CCI with commodity futures, which performs well economic advantages for all 16 commodities. Compared with hedging against commodity index, CCI has a more significant hedging effect on metal and energy subindex futures. Therefore, we finally suggest an effective hedging portfolio composed of CCI and subindex futures in a significant economic sense.