Correlation Analysis Of SHEF And LME On The Price Of Copper Futures During Day And Night Sessions

China has already been the most copper producing and consuming country of the world. Copper futures markets play a key role in copper pricing. On December2013, SHFE launched the copper night session, hoping to strengthen the correlation of SHFE copper future market and world copper future market and reduce investors’overnight risk. To study the operating condition of copper night session and the correlation of SHFE and LME on the price of copper future, we selected the hourly-frequency future price data of SHEF copper day and night session contemporarily with LME. Based on the practice research, we built VAR and VECM models to check copper futures price time series for co-integration test, Granger causality test and error correction analysis. The empirical results show that changes in exchange rates have a significant effect on the ratio of futures arbitrage prices between different markets, there are long-run equilibriums and correction mechanisms between SHFE and LME copper futures price. During the day session, though SHEF price have a guiding role to LME price, the empirical results show that SHFE price was significantly influenced by passed prices, showing SHFE market of weak-form market efficiency. During the night session, mutual influence exists between the two markets, but LME pricing efficiency, showing LME market of efficient. The copper future market during night session effectively help reduce investors’overnight risk, attracting foreign investors to participate in SHFE copper future transaction, and to strengthen the linkage between China’s copper futures market and the world’s copper futures market.