An Empirical Analysis On The Relationship Between China’s Silver Spot Price And Futures Price

Chinese government have fully lift restrictions on the silver market in 1999. Since then,China’s silver reserves, production, consumption, foreign trade have made great progress and demonstrated more and more influence in global silver market.On May 10, 2012 Shanghai Futures Exchange officially launched silver futures, and silver futures as a new species was added to the family of the futures markets.For whether silver future could play its rightful price guide function, this paper gave some empirical analysis. This thesis is divided into six chapters. The main topics of the first chapter described the background, significance, innovation and defects. The second chapter describes the relationship between spot and futures prices both in domestic and foreign research situation. The third chapter introduces conditions about the international silver market and silver resources distribution, production, consumption and trading conditions in domestic market. The fourth chapter gave the theoretical basis of spot and futures prices. The fifth chapter is the empirical process. Paper data used are: Shanghai Futures Exchange closing price of silver futures and Spot silver closing price of Shanghai Gold Exchange. For the stability of the silver spot and futures price data, this thesis makes the ADF test. The ADF test shows that both spot and futures price and the price logarithmic are not in stability, the first difference time series of futures and spot prices are stationary. Johansen co-integration test found that the spot and futures prices are co-integrated, and error correction model also confirmed that they have long-term and stable relationship, and the corrected short-term direction always points to along-term balance relationship. After conducting further Granger causality test, it found that China’s spot market are the Granger reasons of silver futures price, but silver futures are not the Granger reasons for silver spot price. That is to say, China’s silver futures does not play a price discovery function here and the reason analysis are made. The sixth chapter puts forward some suggestions on how to promote the healthy development of China’s silver market.