Hedging China's Energy Oil Market Risks

Marco Chi Keung Lau, Yongyang Su, Na Tan, Zhe Zhang

Research output: Contribution to journalArticle

2 Citations (Scopus)

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 %. However, the Tokyo Oil Futures Contract performs two times better and reduces risk by about 17 %. The empirical results are robust when variance complicated bivariate GARCH and bivariate distributions are used. Our results imply that the energy oil futures market in China is not well-established and more policies are needed to improve market efficiency.
LanguageEnglish
Pages99-112
Number of pages14
JournalEurasian Economic Review
Volume4
Issue number1
DOIs
Publication statusPublished - Jun 2014
Externally publishedYes

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Energy
Market risk
Hedging
Oil markets
Oil
China
Futures contracts
Empirical results
Market efficiency
Tokyo
Shanghai
Bivariate GARCH
Empirical evidence
Futures markets
Risk reduction
Investors

Cite this

Lau, Marco Chi Keung ; Su, Yongyang ; Tan, Na ; Zhang, Zhe. / Hedging China's Energy Oil Market Risks. In: Eurasian Economic Review. 2014 ; Vol. 4, No. 1. pp. 99-112.
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Hedging China's Energy Oil Market Risks. / Lau, Marco Chi Keung; Su, Yongyang; Tan, Na; Zhang, Zhe.

In: Eurasian Economic Review, Vol. 4, No. 1, 06.2014, p. 99-112.

Research output: Contribution to journalArticle

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