Price discovery for copper futures in informationally linked markets

Abstract

The purpose of this article is to contribute to the research on informationally linked markets by investigating the relationships between the Chinese copper futures market and its London counterparts. There is a long run relationship between the Shanghai Futures Exchanges (SFE) with London Metals Exchange (LME) copper futures prices. Furthermore, we find that three regime Markov switching model with changing intercept and variance turns out to be good description of the data. The influence of LME on SFE is bigger than that of SFE on LME.

Acknowledgements

This research was supported by the fund for ‘Study on the Evolution of Complex Economic System and Behaviour Finance’ at ‘Innovation Center of Economic Transition and Development of Nanjing University’ and China National Science Fund NSFC 70671053. This research was also supported by the China National Social Science Fund 07CJL014.

Notes

¹ To save space, we have not provided the results here, they are available upon request.