Keqiang Hou, Luke Chan, Xin Zeng
Author information
a School of Finance, Shanghai University of Finance and Economics, Shanghai 200433, Chin
b Michael G. DeGroote School of Business, McMaster University, Ontario L8S4L8, Canada
c Shanghai Futures Exchange, Shanghai 200122, China
E-mail: hou.keqiang@mail.shufe.edu.cn (Keqiang Hou), chanmwl@mcmaster.ca (Luke Chan), zeng.x@shfe.com.cn (Xin Zeng)
In this paper, we examine the price discovery process and volatility spillover effects in informationally linked futures markets. Using synchronous trading information from the Shanghai Futures Exchange (SHFE), the New York Mercantile Exchange (NYMEX), and the London Metal Exchange (LME) for copper futures from 2000 to 2012, we show that the cointegration relationships of these futures markets changed during 2006–2008. The results indicate that there is a bidirectional relationship in terms of price and volatility spillovers between the LME and NYMEX and the SHFE, with a stronger effect from the LME and NYMEX to the SHFE (versus the effect from the SHFE to the LME and NYMEX) prior to 2006. Our results also highlight the increasingly prominent role of the SHFE in the price formation process and cross-volatility spillover effects since 2008. Finally, we show that volatility spillover has important implications for constructing optimized portfolios for copper investors.
price discovery, return causality, volatility spillovers
Keqiang Hou, Luke Chan, Xin Zeng. Information Linkages between Chinese and World Copper Futures Markets. Front. Econ. China, 2015, 10(2): 272‒300 https://doi.org/10.3868/s060-004-015-0012-5
