Investable Commodity Premia in China

58 Pages Posted: 25 Feb 2020 Last revised: 27 Mar 2021

See all articles by Robert J. Bianchi

Robert J. Bianchi

Griffith University; Griffith University

John Hua Fan

Griffith University - Department of Accounting, Finance and Economics

Tingxi Zhang

Griffith University - Department of Accounting, Finance and Economics

Date Written: March 26, 2021

Abstract

We investigate the investability of commodity risk premia in China. Previously documented standard momentum, carry and basis-momentum factors are not investable due to the unique liquidity patterns along the futures curves in China. However, dynamic rolling and strategic portfolio weights significantly boost the investment capacity of such premia without compromising its statistical and economic significance. Meanwhile, style integration delivers enhanced performance and improved opportunity sets. Furthermore, the observed investable premia are robust to execution lags, stop-loss, illiquidity, sub-period specifications, seasonality and transaction costs. They also offer portfolio diversification for investors. Finally, investable commodity premia in China reveal strong predictive ability with global real economic growth.

Keywords: China, Commodity Futures, Momentum, Carry, Capacity, Investability

JEL Classification: G13, G14, G15, N25

Suggested Citation

Bianchi, Robert J. and Bianchi, Robert J. and Fan, John Hua and Zhang, Tingxi, Investable Commodity Premia in China (March 26, 2021). Journal of Banking and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3525612 or http://dx.doi.org/10.2139/ssrn.3525612

Robert J. Bianchi

Griffith University ( email )

170 Kessels Road
Nathan, Queensland QLD 4111
Australia

Griffith University ( email )

170 Kessels Road
Nathan, Queensland QLD 4111
Australia

John Hua Fan

Griffith University - Department of Accounting, Finance and Economics ( email )

Brisbane, Queensland 4111
Australia
+61 (0)7 3735 4638 (Phone)
+61 (0)7 373 57760 (Fax)

Tingxi Zhang (Contact Author)

Griffith University - Department of Accounting, Finance and Economics ( email )

Brisbane, Queensland 4111
Australia

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