An Empirical Study On Price Discovery And Price Linkage In The Domestic Copper Futures Market

Due to the coronavirus pidemic and local wars and other reasons,the world economy is down,trade friction is escalating,and the competition for various resources is intensifying,but the general trend of global economic integration is irreversible,and China has also been upholding an open and integrated development attitude,so our economy will definitely be more deeply integrated into the general trend of world economic development.Today,China’s position in the global economic development is also rising,and its influence in the metal resources market is further enhanced,which will change the global pricing pattern.In this paper,we will study the price discovery function of China’s copper futures market and the linkage status between foreign copper spot markets and domestic copper futures and spot markets,taking copper metal as an example,and analyze the development of China’s copper futures market from both domestic and international perspectives.First of all,the price discovery function of the domestic copper futures market is studied to understand its own development.The co-integration test and Granger causality test were used to clarify the existence of a mutual guidance relationship between the domestic copper futures market and the domestic copper spot market,and the VECM-PT model and variance decomposition were used to quantify the contribution of the two markets,so that the price discovery function of the domestic copper futures market could be analyzed in detail.The empirical results show that the domestic copper futures market already has a good price discovery function and is more mature in its own development.Second,the price linkage between the foreign copper spot market and the domestic copper futures and spot market is analyzed to clarify the current state of China’s influence in the international copper metal market.A VAR model was constructed for the time series data of the three markets,and then a Johansen cointegration test was conducted to conclude that there is a cointegration relationship among the three markets.In order to further understand the state of the bootstrap relationship between different markets,Granger causality test was conducted,and it was concluded that they are mutually Granger causal.From this,an error correction model is established and the impulse response function and variance decomposition are applied to analyze the degree of mutual influence of prices in the three markets.Finally,a DCC-GARCH model is established to analyze the dynamic correlation coefficients among the three markets.The empirical results show that the copper futures market has the greatest influence in the domestic market and occupies the absolute market pricing power,while in the international market,the domestic copper futures market has reached the level of interaction with the London copper futures market.And the dynamic correlation coefficient results also show that the domestic copper futures market and the domestic copper spot market linkage level is the highest,while the domestic copper futures,spot market and foreign copper spot market linkage is also at a high level,the three markets are highly linked.It can be seen that China’s copper market interacts with the international market and has a certain international status and has a non-negligible influence in the global market.