Study On The Relationship Between China’s Silver Futures Price And Spot Price

The first futures contract was traded on Shanghai Futures Exchange on May10th,2012, which is important for the establishment of pricing power of silver and risk reduction caused by silver price fluctuation. By analyzing the silver price relationship between futures market and spot market, we can estimate the price discovery function of China’s silver futures market and uncover the influencing factors, based on which corresponding suggestion can be proposed to advance the market development.Firstly, this paper theoretically analyzes the mechanism, institutional foundation and influencing factors of the price discovery function. On the basis of theoretical analysis, this paper empirically tests the relationship between the silver future price and spot price, which shows that there is a mutual conduction relationship between the two prices, while both of them are conducted by international future price. The result indicates the ineffective price discovery function as well as the lack of pricing power of China’s silver futures market. In the end, this paper analyzes the underlying factors for this dysfunction and accordingly makes some suggestions.