Research On Correlation Between Futures Prices And Stocks Prices Of Industrial Products In China

The futures and equity markets are playing increasing important roles in China’s economy. Now, it is an important channel for listed company and investors and becomes the barometer of China’s economy. Rise in the early 1990 s, the futures market in China has experienced a decade of rectification. Now, there is Shanghai Futures Exchange, Dalian Commodity Exchange, and Zhengzhou Commodity Exchange in China, which has 47 futures listed species, including energy, metals, agricultural products, and chemical products.With the expansion of scale, the increase of the trades, futures and stock market are playing more and more important role in China’s economic. Stock market focuses on economic resources configuration and corporate risk management of the micro-economic level. But the futures market, focus on the social economic risk management and price discovery of the macro-economic. Future market has price discover function to the spot market, while stock market is known as the “economic barometer”. So, the discusses of the degree of interaction between futures market and stock market have important practical significance.In this research, I consider the polyethylene listed in Dalian Commodity Exchange as future price of industrial products, and the share prices of main polyethylene production enterprises in our country as equity price of industrial products. This research explores if there is a balanced relationship between the price of polyethylene and the stock prices of companies producing polyethylene in China. I also investigate possible dynamic correlation effect between them.The result of the research indicates that there is a long-term cointergration relationship between the equity price and the future price of industrial products. The estimates prove that the vector error correction models of both the equity return and future return of industrial products consistent with the reverse error correction mechanism. The Impulse Response Function provides the evidence that the equity price and future price of industrial products have significant reaction to their own innovations of one standard deviation. But the interaction between them is not significant. Besides, the estimates of DCC-GARCH model indicate that the dynamic correlation coefficient between the equity return and future return of industrial products is greatly influenced by previous price fluctuations and significant sustainable.