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Spillover Effects Between Indochina Metal Futures Markets

Author

Listed:
  • Ravi Kumar

    (Mittal School of Business, Lovely Professional University)

  • Babli Dhiman

    (Mittal School of Business, Lovely Professional University)

Abstract

India and China have been at the top of the exporter, importer, producer and consumer economies. The two neighbouring countries provide the largest market in the world. They also share a similar history of development of their commodity derivatives markets. This paper aims to examine the direction of causality and spillover effect between the metal futures markets of the two economies. The analysis is done for metals such as copper, aluminium, zinc and gold in the period 2009 - 2020 by using Granger causality and Dynamic Conditional Correlation -GARCH (DCC-GARCH) models. The gold futures at the Multi Commodity Exchange (MCX) have a unidirectional causality on the gold futures traded at Shanghai Futures Exchanges (SHFE), unlike other metals having bidirectional causality. Similarly, GARCH results report only long-term volatility spillover for gold futures returns, while for the base metals, both short-term and long spillover exist. The findings indicate that the Indian metals futures market has started to influence the Chinese metal futures. The results have important implications for policymakers, regulators, industrialists and offshore traders of physical commodities in hedging their positions.

Suggested Citation

  • Ravi Kumar & Babli Dhiman, 2022. "Spillover Effects Between Indochina Metal Futures Markets," Business Management, D. A. Tsenov Academy of Economics, Svishtov, Bulgaria, issue 4 Year 20, pages 5-17.
    • Handle: RePEc:dat:bmngmt:y:2022:i:4:p:5-17
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    File URL: http://hdl.handle.net/10610/4734
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    References listed on IDEAS

    as
    1. Pierre L. Siklos & Martin Stefan & Claudia Wellenreuther, 2020. "Metal prices made in China? A network analysis of industrial metal futures," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(9), pages 1354-1374, September.
    2. Magkonis, Georgios & Tsouknidis, Dimitris A., 2017. "Dynamic spillover effects across petroleum spot and futures volatilities, trading volume and open interest," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 104-118.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    spillover; Granger causality; DCC - GARCH; metal futures market; correlation;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • F0 - International Economics - - General

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