The Dynamic Relationship Between SHFE And LME On Prices Of The Copper Future

The risk of the commodity price fluctuation start from the upper reachesof the industrial chain of social production to the consumer terminal thatmake today’s macro economic environment full of changes. And thenfuture market became the main place of enterprises to avoid price risk aswell as administrations stable the macroeconomic environment. But in thesharing of information the globalization of economy, price fluctuations ofthe same kind commodity futures in different markets are notinconsistencies, but still in dynamic correlation at the same time. In thispaper, dynamic mechanism between copper future price in ShanghaiFuture Exchange market and London Metal Exchange market was studied.Based on overage data of copper future price from2012may4thto2013march1stof the SHFE three month contracts and the LME three monthcontracts, after the analysis on time series of ADF test, cointegration test,Granger causality test and ECM model, it was found that there was ankind of long term cointegration relationship between the two markets andalso an causality relationship from LME to SHFE. The impulse responsefunction also tested the conclusion from the dynamic response view. Thatmeans an lack of price ability in SHFE of copper futures which was not inconsistent with the world’s first big consumption.