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Information Linkages between Chinese and World Copper Futures Markets

Author

Listed:
  • Keqiang Hou

    (School of Finance, Shanghai University of Finance and Economics, Shanghai 200433, China)

  • Luke Chan

    (Michael G. DeGroote School of Business, McMaster University, Ontario L8S4L8, Canada)

  • Xin Zeng

    (Shanghai Futures Exchange, Shanghai 200122, China)

Abstract

In this paper, we examine the price discovery process and volatility spillover effects in informationally linked futures markets. Using synchronous trading information from the Shanghai Futures Exchange (SHFE), the New York Mercantile Exchange (NYMEX), and the London Metal Exchange (LME) for copper futures from 2000 to 2012, we show that the cointegration relationships of these futures markets changed during 2006¨C2008. The results indicate that there is a bidirectional relationship in terms of price and volatility spillovers between the LME and NYMEX and the SHFE, with a stronger effect from the LME and NYMEX to the SHFE (versus the effect from the SHFE to the LME and NYMEX) prior to 2006. Our results also highlight the increasingly prominent role of the SHFE in the price formation process and cross-volatility spillover effects since 2008. Finally, we show that volatility spillover has important implications for constructing optimized portfolios for copper investors.

Suggested Citation

  • Keqiang Hou & Luke Chan & Xin Zeng, 2015. "Information Linkages between Chinese and World Copper Futures Markets," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 10(2), pages 272-300, June.
    • Handle: RePEc:fec:journl:v:10:y:2015:i:2:p:272-300
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-004-015-0012-5
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    Citations

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    Cited by:

    1. Klein, Tony & Todorova, Neda, 2021. "Night trading with futures in China: The case of Aluminum and Copper," Resources Policy, Elsevier, vol. 73(C).
    2. Yu, Hui & Ding, Yinghui & Sun, Qingru & Gao, Xiangyun & Jia, Xiaoliang & Wang, Xinya & Guo, Sui, 2021. "Multi-scale comovement of the dynamic correlations between copper futures and spot prices," Resources Policy, Elsevier, vol. 70(C).
    3. Klein, Tony & Todorova, Neda, 2019. "Night Trading with Futures in China: The Case of Aluminum and Copper," QBS Working Paper Series 2019/06, Queen's University Belfast, Queen's Business School.

    More about this item

    Keywords

    price discovery; return causality; volatility spillovers;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • G1 - Financial Economics - - General Financial Markets

    Statistics

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