Research On Price Discovery Function Of Nonferrous Metal Futures Market In China

At the beginning, this paper briefs the status quo and characteristics of China’s commodity futures market, leading to the need of research on China’s commodity futures market price discovery function (PDF). Taking China’s non-ferrous metals futures markets as the study subject, this paper did an empirical analysis of the relationship between the non-ferrous metals futures market and spot market prices.Firstly the author discussed the meaning of the PDF of futures market, then reviewed and summarized the related research. In the concluding part, the paper conducts empirically research of China’s futures market PDF of copper, aluminum, zinc, and lead, with linear regression and comparative analysis, Johansen test, Granger causality test, VAR model, VEC model, impulse response function analysis and variance decomposition. The author conducts the empirical analysis both from static and dynamic perspectives. The interval of sequential price data of copper and aluminum ranges from Aug1,2003to July31,2012, with2119samples, that of zinc from the Nov2,2007to July31,2012, with1156samples, that of lead from March24,2011to July31,2012, a total of331samples. The empirical results show that:From the static point of view, the price discovery function of copper and aluminum futures dominates due to ideal market conditions, with that of zinc futures being second and the lead futures markets ranking the weakest. From the dynamic angle, the copper futures market and spot market has a two-way guiding relationship, yet guiding effect of the futures market more obvious. As well, the Aluminum futures market and spot market has a bilateral guiding relationship; yet in the very short term, the guiding effect of spot market to the futures market is not very significant, which yet increased its presence with the increase of the lag orders. Nevertheless, the futures prices of Zinc affect its spot prices unilaterally. No significant guiding relationship is detected between the futures and spot prices of lead.At the concluding part, the author summarizes the empirical analysis, and gives out some policy suggestions.