An Empirical Study On Price Linkage Between Domestic And International Copper Futures Market

As an important industrial non-ferrous material, copper has a wide range of applications in various industries and concern to national economic security. With the acceleration of reform and opening-up and urbanization, copper demand is growing rapidly. Copper demand is growing rapidly. Although domestic copper mine resources are abundant, but mining environment is complex and lack of the advanced mining technology, we can only rely on imports to meet domestic demand. At present, China has become has become the superpower of copper consumption and imports, should get the right to speak in the global copper pricing. However for a long time, the international copper price has been dominated by the London Metal Exchange, China suffered many losses in the import and export trade, the impact and risks companies face are increasing, security and stable development of the national economy are seriously threatened.The increasingly competitive international economic situation empowers futures market important mission and responsibility, we must build a strong and perfect copper futures market, thus we can master copper autonomy, improve the competitiveness of Chinese enterprises in the international market. Therefore, a comprehensive understanding of Shanghai copper futures market development present situation, exploring the price linkages between Shanghai market and the international copper market and Shanghai copper futures market’s pricing efficiency in the international markets, undoubtedly have important practical significance to the corporate hedging, arranging production and national economic development.This paper firstly combs price linkage theory and research literature, gives a detailed presentation on the measurement methods used in empirical research price linkage, analysis the low misspecification problem existed in ECM model, explains the necessity of processing and filtering data to ensure changes in variable amplitude, and accordingly designs specific empirical models. Then, this paper describes the development process and status quo of SHFE copper, and has a comparative analysis from multiple aspects of copper futures markets at home and abroad, in order to grasp and understand copper futures market operation as a whole. In the empirical part, this paper verifies the ECM model error problem firstly, and then makes ECM model regression comparison of different periods based on copper futures markets of Shanghai, New York and London. The regression results show that the Shanghai copper futures market has good correlation with the London copper futures market, but compared with New York, Shanghai copper futures market doesn’t have fast enough reaction to the messages from the London market, market maturity needs to be promoted further. Finally, this paper summarizes and analyzes the main conclusions of empirical part, puts forward some suggestions on improving Shanghai copper futures market.