EMPIRICAL RESEARCH OF SHFE COPPER FUTURES' PRICE DISCOVERY

The paper described an empirical research on the function of the price discovery of the copper futures in SHFE by using VAR and VECM models.It was found that the copper futures and spot prices have Granger bi-directional leading relationship and a cointegration relationship,so the futures and spot prices have long-run equilibrium relationship.For the copper futures,the spot market plays a more important role in the function of price discovery,because spot market accounts for 65.4% in the function of price discovery which is bigger than 34.6% from futures market.In the impulse responses function,spot price's innovation has more influence on futures' price,besides the futures and spot prices have immediate obvious feedback on one standard difference innovation of themselves.At the same time,the VECM model confirms that the copper futures' price is adjusted based on spot price.All these results explain that the copper spot market plays a more important role in the price discovery.