A Study On Price Discovery And Speculative Bubbles In Commodity Futures Markets

Price discovery is an important function of commodity futures market. Effective price discovery can accurately lead the future price, and optimize resource allocation. As an expection of future commodities price,futures price is very important in price disovery, it affects the current commodity prices and the future price expectations.This dissertation study the price discovery in commodity futures markets,and analysis the rational speculative bubbles in commodities markets by using the traditional price bubbles theory.Chapter II use the common factor model to study the price discovery function in the metal markets. Applying Granger causality test, impulse response analysis, we examines the lead-lag relationship on the commodities markets, analyse the response to exogenous shocks on every market. Moreover, by using the bivariate-BEKK model, we study the volatility spillover effects between the futures and spot markets. Finally, regarded the time to maturity as the proxy variable,this chapter discuss the risk premium in commodities markets, studying the characteristics of futures price as the unbiased estimate of the spot markets. The results shows,there are long-term equilibrium relationship between futures and spot markets, but the capacity of price discovery are different in every markets. The capacity of price discovery is stronger in copper and aluminum markets than zinc. However, the results reject the hypothesis of unbiased estimate on every markets.Chapterâ…¢studies the convenience yield in the commodities markets. Based on the price determining theory, we study the option characteristic of the convenience yield,using regression analysis on the convenience yield to relevant variables. Studies suggest that there are significant option characteristic on the convenience yield. The real convenience yield has a negative correlation with inventory levels, and positively correlated with stock volatility. It is weakly supported that there are negative correlations between the covenience yield with the autocorrelation in the spot price.Chapterâ…£examines the speculative bubble in commodities markets by use of the nonlinear model Based on the convenience yield theory,we construct the abnormal returns theoretical model in the commodities markets. Applying the Markov switching model and the threshold autoregressive model, this chapter examine the rational speculative bubbles in the copper and aluminum markets. The results show that the speculative bubbles are observed in two metals markets,and the copper bubbles were seen from January 2006 to October 2006, from September 2008 to April 2009. the aluminum bubbles were seen from December 2005 to August 2006, from December 2008 to April 2009.Chapterâ…¤study the speculative bubbles applying the duration dependence test. Based on the option pricing theory of convience yield,we test the speculative bubbles in the copper and aluminum markets combining with duration dependence approach to weekly data.Moreover,we have the robust test to the empirical results. The results shows that,from February 2004 to June 2008, there are rational speculative bubbles in the aluminum market,but the copper market bubble is insignificant.There are macro and mirco reasons with which can explain the aluminum market bubbles. Viewing from the micro-level,the spot market trading system is not perfect, its transaction cost is higher than the futures markets,these will lead the efficiency of spot markets is lower than the futures market, and the spot price can not quickly responded to the futures price,it is deficient in prices price formation mechanism of spot market.Moreover,from the macro perspective,the bubbles is correlated with the imbanlance of macroeconomics.Chapterâ…¥is the conclusion and prospect of research.In this chapter, we summarize the conclusions of this study, and prpose some policy suggestions. We think that improving the information report and cash market trading system,and expanding the scope of commodity markets,enhanceing the professional quality of practitioneers are important to increase the commodity markets pricing efficiency. Lastly, based the results of this study, we point out the further study path.