The Empirical Analysis Of Chinese Futures Market Efficiency

The general efficient market refers to the one in which asset prices fully reflect all the available information while the futures market efficiency implies the ability of current futures prices to forcast the last trading-day cash price unbiasedly.In the theory part,this essay elaborated the content of market efficiency and the special futures price generation progress to differenciate the effeciency of the two market,ie the general market efficiency equal to fair game model and the efficient futures market follows the martingale.The different concept determines different empirical method:narrow Random Walk Model always adapt to test the general market efficiency while in the futures market there are three commonly used empirical means directly designed within the martingale content,ie the unbiased forecasting ability of futures prices,the prediction capabilities comparation of the time serie model VS the futures price and the arbitrage method.We choose the first two to achieve our goal.In the Empirical part,we selected the futures and the cash price of copper and aluminum from January 1999 to December 2006 to implement the empirical test.Using the Co-integration model and parameters constraints test ,we found the copper and aluminum futures market of all forcast horizone show long-term market efficiency.But when ECM model and parameters constraints was used to test the short term efficiency,only one and two week ahead aluminum futures market passed the examination.So the short-term comparative test has to be implement to identify the relative effeciency. According to the result, we found the neural network model fitting the last trading-day spot prices no better than the futures prices, the futures market is relatively efficient.