Empirical Analysis Of Incremental Effectiveness And Relative Efficiency Of China's Metal Futures Market

With the rapid economic growth and accelerating urbanization,industrialization, China has become a consumption and import power of copper, aluminum, lead, zinc, tin, nickel and so on. However, since the import and export prices of china are decided by foreign sellers or buyers Refering to the futures price of Lndon Metal Exchange, domestic non-ferrous metal enterprises are forced to accept the transaction prices. So that China's economic growth paid a heavy price, also threatens the economic security of our country. China's consumption and import volume of metal do not match the pricing of metal in international market. Based on this phenomenon, the paper explores one of the most important factors which impact the pricing of metal in international market, that is the information efficiency of metals futures market. Consequently, we can correctly understand the role and status of China's metals futures market in the international pricing of metal, provide some valuable market information for market participants and futures regulators, and provide references for Shanghai and Shenzhen 300 Stock Index Futures which was released at not long ago.The paper comprehensively study the efficiency of China's metal futures market from the point of evolving efficiency and relative efficiency. Firstly, Taking into account China's metal futures return series have non-symmetric effect, the paper Constructs time-varying parameters State-space model which considers the effect of non-symmetric, this model can be applied to test the evolving efficiency of China's metal futures market. Secondly, on the basis of China's metal futures market is weak-form efficiency, the paper applies the methd of Lee(1994) studying the Volatility relationship between Spot exchange rate and Forward exchange rate to the study of relative efficiency, takes cointegration residuals as Exogenous explanatory variables introduced into Structure Vector Autoregression model, and Constructs a Bivariate EC-SVAR model which is used to Compare relative efficiency between the domestic and international metal futures markets.The evidence shows that the efficiency of China's metal futures market is a dynamic upgrading process:in the early period of establishment, the copper and aluminium futrues markets are not efficient, with the gradual improvement, the market is becoming more and more efficient, and eventually both copper and aluminium futures market reach weak-form efficiency at 2007, time-varying parameters State-space model which considers the effect of non-symmetric particularly suits to the efficiency test of China's metal futures market. And then, by examining the relative efficiency between domestic and international metal futures markets, although China's metals futures market has reached the weak form efficiency, the paper find, compared with international metal futures markets, the efficiency of China's metal futures market is still low, which needs to be improved.