Research On Hedging Effect Of Copper Futures In China

Since 2000,copper consumption in China has continued to increase.China,USA,Europe and Japan account for 90% of global copper consumption,while China accounts for nearly 50%.With such a large spot market as the basis,traders began to seek futures markets for risk aversion.Hedging is one of the core functions of the futures market.Traders can reduce the risk of copper spot price fluctuations by the effective futures market.The Shanghai Futures Exchange pays special attention to copper futures.Copper futures is also one of the more mature futures in China,and its trading volume ranks second in the Shanghai Futures Exchange.China’s copper futures have experienced more and more changes since they were officially listed in1993.The relevant departments have done a lot of work in the construction of market systems and the improvement of trading rules.In 2018,they launched copper options and standard warehouse receipt trading platforms.In recent years,the Shanghai Futures Exchange has used copper as a breakthrough to call for more companies to adopt risk evasion through the futures market.In the 2019 plan,it proposed to build the ambitious goal of an international futures exchange.However,the birth of China’s futures market is nearly a century later than that of the United Kingdom and the United States.There is still room for improvement in its openness and core functions.Therefore,still need to rely on the development experience of developed countries.Study the operational characteristics of China’s futures market and establish a futures market with Chinese characteristics.This paper takes copper futures as the research object,analyzes the influencing factors of hedging effect and conducts a comparative study on the Sino-British copper futures market,evaluates the performance of thehedging function of the copper futures market,and conducts supplementary research on the theory of hedging.Provide an empirical basis for the enterprise hedging strategy.This paper first introduces the research background and significance,then discusses the theoretical basis of hedging in the futures market,and then enters the core part of the paper.This paper analyzes the Chinese copper futures market through trading volume,transaction amount and The relationship between futures and spot.Then this paper summarizes the influencing factors of the hedging effect of China’s copper futures market,including basis,period relationship,market factors and technical factors.The ECM model and the conditional OLS model are used to estimate the optimal hedge ratio of Shanghai copper and UK copper.Objectively analyze the effect of hedging in China’s copper futures market by using hedging performance indicators.By dividing the bull and bear market,this paper evaluate the effect of Hedging in different market conditions.The study found that both the static model and the dynamic model,the hedging rate of London Copper is higher than that of Shanghai copper.When the market is at different stages,the fluctuations of the optimal hedging ratio are different.The optimal hedging ratio of the Chinese and British copper futures markets is more volatile in the bull market.The empirical results show that London copper’s hedging effect is better than Shanghai copper.In Shanghai copper,the bear market hedge effect will be better.It can reduce the risk by about 68.22%,and only 51.48% in the bull market.Finally,policy recommendations are proposed from three perspectives:investor structure,trading rules,and futures market development.