Research On The Impact Of Economic Policy Uncertainty On The Volatility Of China’s Copper Market

The copper industry is an important component of China’s national economy and an important strategic material for promoting steady economic development.It is different from other metal raw materials.Abnormal fluctuations in copper prices can affect the prices of raw materials in multiple industries,increase operational risks for enterprises,and lead to operational difficulties.For government departments,when copper prices rise significantly,the development speed of large copper consuming industries such as infrastructure construction and new energy vehicles slows down.For investors,fluctuations in copper prices can lead to increased investment risks.In recent years,the domestic macroeconomic environment has shown an increasing trend of uncertainty due to the impact of the global situation.The economic policy uncertainty index,as an extremely important macro influencing factor,has always been an important topic in studying its relationship with financial market volatility.Therefore,the significance of paying attention to the impact of economic policy uncertainty on copper market volatility is self-evident.This article uses a GARCH-MIDAS model that combines the Mixed Frequency Data Sampling(MIDAS)model with the GARCH model to study the impact of economic policy uncertainty on copper market volatility.The first chapter of the paper introduces the research background and significance of the selected topic,reviews relevant literature from three aspects,and elaborates on the research content,methods,technical roadmap,and two possible innovative points of the paper.Chapter 2introduces the establishment and development of China’s futures market,the current development status of Shanghai copper futures market,the Shanghai Futures Exchange Shanghai copper futures standardization contract,and the Shanghai copper futures trading mechanism.Chapter 3analyzes the impact of economic policy uncertainty on the mechanism of the Shanghai copper futures market,and establishes the GARCH-MIDAS model and the dual asymmetric GARCH-MIDAS model based on the mixed frequency data model(MIDAS)and GARCH class model,respectively.In addition,the LLK,AIC,and BIC criteria,as well as the MSE and QLIKE criteria,are also introduced.The fourth chapter conducts pretreatment,preliminary analysis and statistical test on the price data of Shanghai copper futures market and the uncertainty index data of China’s economic policy selected in this paper.Chapter 5 analyzed the parameter estimation results,model fitting effects,and intra sample volatility prediction effects of GARCH-MIDAS models based on full sample data.Furthermore,MSE and QLIKE were used to analyze the ex sample volatility prediction effects of different models.Chapter 6 summarizes the research conclusions of this article and proposes relevant countermeasures and suggestions,as well as prospects for further research in the future.The research conclusion shows that the long-term volatility of China’s copper futures market is influenced by the economic policy uncertainty index,and the parameter estimates are significantly negative at a 10% confidence level.Therefore,the long-term volatility of China’s copper futures market decreases with the increase in economic policy uncertainty,and the increase in economic policy uncertainty caused by economic policy adjustments will suppress the long-term volatility of the copper futures market.The GARCH-MIDAS-norm model based on Beta and Almon functions has the highest accuracy in predicting out of sample volatility.Compared to the GARCH-MIDAS-norm model,other models may have a certain degree of parameter redundancy,which affects the accuracy of the model’s out of sample volatility prediction.Therefore,when formulating economic policies to intervene in the economy,policymakers should carefully consider reducing the impact of economic policy instability on the copper market.Copper industry enterprises can predict copper market fluctuations based on economic policy uncertainty,avoiding production and operation difficulties caused by copper price fluctuations to the greatest extent,and achieving profit maximization.When investors invest in the copper market,they should closely monitor changes in their country’s economic policies and adjust their copper futures positions in a timely manner to avoid risks and maximize returns.