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Frontiers of Economics in China

Front. Econ. China    2015, Vol. 10 Issue (2) : 272-300
Information Linkages between Chinese and World Copper Futures Markets
Keqiang Hou1(),Luke Chan2(),Xin Zeng3()
1. School of Finance, Shanghai University of Finance and Economics, Shanghai 200433, China
2. Michael G. DeGroote School of Business, McMaster University, Ontario L8S4L8, Canada
3. Shanghai Futures Exchange, Shanghai 200122, China
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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 2006–2008. 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.

Keywords price discovery      return causality      volatility spillovers     
Issue Date: 19 June 2015
 Cite this article:   
Keqiang Hou,Luke Chan,Xin Zeng. Information Linkages between Chinese and World Copper Futures Markets[J]. Front. Econ. China, 2015, 10(2): 272-300.
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Keqiang Hou
Luke Chan
Xin Zeng
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