Empirical Research On The Efficiency Of The Silver Futures Market In China

Silver futures was officially listed and traded on SHFE in May 2012. The generating and development of silver futures not only has enriched futures variety, expanded investment channels in domestic silver market, provided price guidance in order to evade silver price volatility risk for silver production and processing enterprises, but also offered the general investors new investment product as well as was beneficial to perfect precious metals trading system and financial market system on SHFE. However, efficiency is a core standard to measure the market function. In this sense, whether the silver futures market has achieved effective state, and whether the market has elaborated the price discovery function into full play, are crucial to develop the silver futures market in our country and are the basic of realizing other normal functions effectively as well.Since silver futures was listed three years ago, the study of silver market efficiency has been relatively scarce, and the existing research was based on the data since then as a result the sample selection is limited. According to the review of these literatures and based on the efficient market hypothesis theory, we first elaborate the development status of silver spot and futures market in our country. Next, using the daily settlement prices of silver futures on SHFE and the weighted average of prices of silver spot on BOCE from September 2013 to February 2015, we empirically analyze the information efficiency and the price discovery efficiency of silver futures market. The results show that silver futures market had reached weak valid state in China and the futures price can effectively exerted the function of price discovery. Beyond that, the futures price had a great instructive effect on the spot price, not vice versa. In the end, the main conclusions and some suggestions are present based on above discussion and analysis.