| Since the futures markets, price discovery function of the futures market has become an important economic function. Based on price-discovery mechanism, production operators, investors and financial institutions make reasonable production and management decisions and investment decisions, which contribute to the rational allocation of resource and economic stability.The relationship between commodity futures prices and spot prices has been the focus of academic researches, but mostly based on static models. In order to study the influence of the futures market to the price movement, this paper uses the Shanghai Futures Exchange (SHFE) and the London Metal Exchange (LME) Copper Futures Markets as the object of study, and counts copper futures prices and spot prices of SHFE and LME from2004to2012. The paper uses the carry-cost theory to the pricing of futures, cointegration test, error correction model, common-factor model and state-space model to measure dynamic contribution of the copper futures price discovery process in SHFE and LME during the period from2004to2012.The results show that:the contribution degrees of the copper price discovery process vary over time. In the long term, there are cointegration relationship between futures prices and spot prices of copper futures market in SHFE and LME. The copper futures market plays a dominant role in price discovery, contributions of the copper futures price discovery process in SHFE and LME were83.83and93.27%.In comparison, SHFE copper futures market was weaker than LME market in price discovery, and it fluctuates significantly.The paper not only provides further empirical evidence for previous literature about price discovery, but also explains the influence of the futures market to the price movement. Combined trading mechanism of SHFE and LME, the paper also provides the experience and reference to the development of China’s futures market. |
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