The Inter-Relationship Between Futures Price And Stock Price In Aluminum Industry

Price discovery is the basic function of mature futures market. In fact, the changes of commodity futures price are directly or indirectly related to the performance of listed company and its stock prices. In this paper, based on aluminum, we study the inter-relationship between the commodity futures price and the stock price of the listed company in the supply chain upstream and downstream.In this paper, we proposed and proved three ways which transfer the fluctuation effects of aluminum futures price to the stock market by the futures price discovery function to the spot, plate effect of stock market and the turnover of capital flow in the futures market and stock market. The performance of aluminum stock price respond to the fluctuation of futures price is the impact of the three combined transmission mechanism.Based on the method of co-integration theory, the Granger Causality Test, VAR model, error correction model, the impulse response function and variance decomposition, we further analyze the price discovery relationship (leading lag relations) between the price of aluminum futures and the stock price index of aluminum companies. The results show that the price of aluminum futures has the same long-term trend as aluminum stock price index and aluminum futures price guides the stock price index in the unilateral way. The upstream stock price index should lag to changes in the price of futures in the short-term and changes in futures price in the long period of time lead to changes in downstream stock price index significantly; It is the aluminum futures that play an important role of price discovery function. Bringing the information of aluminum futures price into the system will help us to improve the accuracy of forecasting the price of aluminum stock. Besides, this paper also found the evidence that there is a bilateral guiding relationship between the futures and stocks in domestic aluminum markets, which is different from previous studies that only futures prices guides the price of stock.Through this empirical research, it doesn't only help companies, investors, sector agencies make decision, but also extend the chain of futures price discovery function to stock market, lengthen the research chain of virtual capital market.