The Research Of The Relevance Between China’s Nonferrous Metal Futures Prices And Stock Prices In The Same Industry

With20years developed, A-share market has become the barometer of China’s economy, which scale is growing and status is increasing.Now, it is an important channel for listed company and investors. Shareholder Structure Reform was advancing completely in2005, China’s stock market was gradually moving towards the era of full circulation, which made the interests of Tradable shareholders and Non-tradable shareholders converging, the level of corporate governance and performance has been improved significantly. Throughout2010, A-share market cumulative transaction has exceeded three hundred thousand billion RMB, which is equivalent to half Gross Domestic Product of that year. China’s commodity futures and stock markets are rising almost simultaneously, but the Process of commodity futures is slightly tortuous. After a decade of rectification, there is Shanghai Futures Exchange Dalian Commodity Exchange and Zhengzhou Commodity Exchange in china, which has26futures listed species, including energy metals and agricultural products. The amendment of Future Exchange and Management Regulations pointed out that the futures market was an significant part of our modern financial markets, and confirmed the role of the future market in price discovery and hedging in china.The stock market focuses on economic resources configuration and corporate risk management of the micro-economic level, but the futures market focuses on the socio-economic risk management and price discover of the macroeconomic level. Future market has price discover function to the spot market, while stock market is known as the "economic barometer". The efficient market hypothesis holds that in a fully efficient market, one specific information that can affect the company’s fundamental value can be transmitted to investors quickly, then market competition will drive the prices of securities reflect the information quickly and accurately, which makes the price of securities equal to "its intrinsic value." In recent years, the pace of innovation on financial products is speeding up, there is stock, band, futures, convertible corporate bonds, exchangeable bonds, warrants and exchange traded funds in China’s capital market. Stock index futures contract was launched on china’s capital market in2010, which is favor by stock investors for hedging market risks, it is become the most largest futures products of china. Studying of financial markets is becoming an important issue for academics and financial practitioners.In this paper, I select copper aluminum and zinc listed in Shanghai Futures Exchange as future price, while Jiangxi Copper, Aluminum Corporation of China and Zhuzhou Smelter Group’s as stock price, to study the price discovery function from future to stock and make corresponding suggestion. I employ unit root tests, Granger causality test and so on, to analysis the possible relationship between China’s non-ferrous metals future price and the stock price. The conclusions are as followings. Firstly, the standard deviation of the stock price is greater than futures significantly, which indicate that stock market has greater risk than the future market. Secondly, there are Long-term stable relationships between stock prices and futures prices, futures prices have reverse adjustment mechanism to stock price. Thirdly, there are two-ways guiding mechanism between Copper and aluminum futures market and stock market.