China's copper futures market efficiency analysis: Based on nonlinear Granger causality and multifractal methods

Yaoqi Guo, Shanshan Yao, Hui Cheng*, Wensong Zhu

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Price discovery and market efficiency are the centerpiece of the market microstructure design. This study investigates the nonlinear correlation between the spot and futures prices in China's copper market using nonlinear Granger causality and multifractal methods, and it further analyzes the dynamic efficiency of China's copper futures market. According to the results of the nonlinear Granger causality test, there is a significant bidirectional nonlinear causality between the spot and futures prices in China's copper market. Excluding the effects of the first and second orders, there is still a high-order correlation between the spot and futures prices of the copper market. Additionally, the multifractal detrended cross-correlation analysis (MF-DCCA) method is used to obtain the long-term correlations of high order in the spot and futures markets. The time-varying rolling Hurst exponent indicates that the efficiency of China's copper futures market has gradually become more effective over time.

Original languageEnglish
Article number101716
JournalResources Policy
Volume68
Number of pages10
ISSN0301-4207
DOIs
Publication statusPublished - Oct 2020
Externally publishedYes

Keywords

  • Market efficiency
  • MF-DCCA
  • Nonlinear granger causality
  • Price discovery

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