Cointegration Test Between Spot Prices And Futures Prices Of China's Aluminum And Caoutchouc Futures Contracts

An effective futures market has a mechanism of price discovery and risk aversion, and the futuresprices would effectively predict the spot prices,which would enable producers and consumers toadjust their strategy in the spot market. Cointegration between the futures prices and the spotprices is a necessary condition for the market efficiency hypothesis. The paper appliedEngle-Granger technique of cointegration for testing the cointegration between the futures pricesand the spot prices of China's Aluminum and Caoutchouc futures contracts respectively,andprovide their Error Correction Model. The result shows that, the futures prices series of seven,fourteen and twenty-one days prior to the last trading day, and the spot prices are respectivelycointegrated in China's Aluminum futures contracts, with cointegration coefficients 0.9753,0.9032and 0.8739 respectively;The futures prices series of seven, fourteen and twenty-one days prior tothe last trading day, and the spot prices are also respectively cointegrated in China's Caoutchoucfutures contracts, with cointegration coefficients 0.961,0.906 and 0.898. Error Correction Modelsshow that, the futures prices series of seven days prior to the last trading day exhibits relativelystrong leading role rather than that of the futures prices series of fourteen and twenty-one daysprior to the last trading day.