The Application Of Arima Models For Forecasting The Copper Futures Prices In China

The futures market has existed for more than one and a half a century. Now it has developed into a mature market where investors can discover prices, hedge risk and seek high profit. Although the futures market in China was opened almost at the same time as the stock market, its development has been relatively slow. This doesn't cater for the steady development of China's economy. It can be anticipated that the futures market will undergo a quick step ahead in the following years. As far as copper futures price is concerned, there are three major trading places: the London Metal Exchange (LME), the Commodity Exchange Division of the New York Mercantile Exchange (COMEX/NYMEX) and the Shanghai Futures Exchange (SHFE). They have played and are still playing important roles in the copper industry. This research attempts to identify the relationships within the system of copper futures price of SHFE being modelled.The thesis examines the pricing efficiency of shanghai futures exchange copper market. In an efficient market, the relevant signal to be used by the traders and processors is simply the futures price. The futures pricing efficiency is measured in terms of the forecasting ability of SHFE using copper futures price forecasting techniques. This study investigates the application of time series analysis methods for forecasting copper futures price in China . The series of monthly closing copper futures price of SHFE during the period 1996 to 2002 is used for the study . Univariate time series models, including autoregressive integrated moving average (ARIMA ) models are applied and the resulting accuracy is compared.