Research On The CO-Movement Effects Between Shanghai Future Exchange And London Metal Exchange

China began the trading of copper futures in 1990s. After 20 years of development, the trading volume of Shanghai copper future far exceeds the world copper pricing center, the London Metal Exchange, ranking the first position in the world. However, the Shanghai futures exchange is a regional futures exchange, with the continuous development and improvement of Chinese capital market, the linkage between Shanghai and London copper futures market deserves deeply concerned.This paper uses commodity futures pricing theory, the non arbitrage equilibrium principle, the herding effect theory and the market microstructure theory to analyze the co-movement effects between SHFE and LME, and chooses different data which collected after SHFE have initiated the continuous trading system and uses multiple models such as multivariate GARCH model, error correction model, Grainger causality test and impulse response function method to investigate the volatility spillover, co-integration relationship and price discovery ability among them.The main conclusions are as follows:contracts in the different delivery periods of Shanghai market have co-integration relationships with London’s contract; the speed of contracts that in the different delivery periods of Shanghai market tend to equilibrium are different; there exists bidirectional volatility spillover between London and Shanghai market;Shanghai and London copper future market have different price discovery ability in different trading session. In the upward channel, the London market has strong price discovery ability. In the downtrend channel, the discovery abilities among them are the same. No matter day or night period, London market shows strong pricing power; When the impact comes from the Shanghai market, the Shanghai market and the London market performance are obvious, both in the first phase of the reaction, when the impact from the London market, Shanghai market and London market performance differences.The main innovation of this paper is to analyze co-movement effects from the perspective of co-integration, spillover effects and price discovery ability and examine the co-integration relationship between the twelve series of the Shanghai market which in the different delivery periods, introduce VARMA-DCC-GARCH model to test the risk transformation and test the price discovery ability between LME and SHFE with synchronizes data.