Dependence structure between oil and other commodity futures in China based on extreme value theory and copulas

This paper examines the dependence structure between oil futures with other major commodities including gold, copper, zinc, aluminium, rubber, corn, cotton and sugar in China. To this end, we apply the extreme value theory (EVT) and dynamic copula approach, which allows for measuring both average and tail dependence. Contrary to the findings in the literature on stock markets, this paper reveals significant right tail dependence rather than left tail dependence between oil futures and most of the other eight commodities. These findings provide a new insight regarding the behaviour of oil and other major commodities. This paper thus has some significant implications for investors, risk managers and policymakers.