Hedging Climate Change News With Commodity Futures: An Index‐Tracking Approach
提出基于指数追踪方法的交易策略，用商品期货构建对冲气候风险的组合，发现商品期货是有效工具，且卖空限制能提升样本外表现。
ABSTRACT We propose and implement a trading strategy based on the index‐tracking approach to build portfolios that hedge climate risk using commodity futures. We consider the climate change news index of Engle et al. to derive the hedge target. The empirical results suggest that the index‐tracking approach performs well in constructing climate change hedge portfolios. The short‐selling constraint enhances the out‐of‐sample hedge performance due to the alleviation of overfitting. The hedge performance indicates that commodity futures could be effective tools for hedging climate risk. We further reveal the heterogeneous roles of commodity futures in hedging climate risk. Our work provides an effective strategy for constructing climate change hedge portfolios and highlights the important and potential role of commodity futures in the era of climate change.