The Studies On Information Spillover Effects Between Chinese Copper Futures Market And The Related Stock Market

ABSTRACT:In recent years, with the gradual improvement and perfection of the forward market, Shanghai Futures Exchange has become one of the three copper pricing centers, where the amount of copper goods exchanged ranks second in the world. The total market capitalization of Shanghai and Shenzhen Stock Market takes a larger and larger part of the GNP, and these two markets have more and more effect on our country’s economical development. As the economic integration and financial globalization, markets are more and more closely related to each other, thus Spillover Effect and Contagion Effect have more and more power. Copper futures are important strategic reserve resources, and the copper futures market is the leader part of our country’s stock market. Researches to the Spillover Effect between the copper futures market and the related stock market could help to recognize the information transmission and risk contagion in the financial market, to make investment strategies for participants, to offer better suggestions the policy making departments and the regulation departments, and to learn about the futures markets and stock markets in our country.The thesis firstly gives a theoretical analysis to the spillover effect between the copper futures market and the related stock market. Then stock index of quoted companies both on upstream and down stream are made referring to Shenzhen component index. Through VAR model, co-integration, and Granger causality test, the effect that copper futures’price have on quoted copper companies both on upstream and down stream. It is revealed that the copper futures market has causal relations with the related upstream and downstream stock market, and that both of them are related to lagging order index. On its basis, the sample return order is fitted by structuring standardized cell GARCH(1,1) model, and its daily VaR value is evaluated and examined. Then, the thesis use dual BEKK-GARCH(1,1)model and risk-Granger to test the fluctuation spillover and extreme risk spillover effect of the two markets. The result shows that there are bi-directional fluctuation spillover effect and extreme risk spillover effect between the Shanghai Copper Futures Market and the copper industry upstream and downstream stock market. However, the situations in the upstream and the downstream companies are different, especially the difference of risk spillover due to difference of confidence level. Last but not least, the thesis proposes some suggestions to the policy making departments, regulation departments and investors to promote the function of financial market.