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A leader of the world commodity futures markets in the making? The case of China's commodity futures

Author

Listed:
  • Fung, Hung-Gay
  • Tse, Yiuman
  • Yau, Jot
  • Zhao, Lin

Abstract

We use the daily data of 16 commodity futures contracts traded in China and corresponding foreign markets (the US, the UK, Japan, and Malaysia) to analyze the linkages between markets. Several findings are noteworthy. First, trading returns of foreign markets, such as the US, have significant impact on China's overnight (close-to-open) returns and vice-versa. Second, daytime (open-to-close) returns of many Chinese commodity futures contracts are not led by foreign daytime returns. Finally, the close-to-close returns analysis suggests that there are no significant lead-lag relationships between the Chinese and foreign markets. These results suggest that (1) the Chinese commodity futures markets are information-efficient, and (2) they are likely to be driven by local market dynamics occurring during the daytime trading session.

Suggested Citation

  • Fung, Hung-Gay & Tse, Yiuman & Yau, Jot & Zhao, Lin, 2013. "A leader of the world commodity futures markets in the making? The case of China's commodity futures," International Review of Financial Analysis, Elsevier, vol. 27(C), pages 103-114.
    • Handle: RePEc:eee:finana:v:27:y:2013:i:c:p:103-114
    DOI: 10.1016/j.irfa.2013.01.001
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    References listed on IDEAS

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    More about this item

    Keywords

    Trading and non-trading returns; Market linkages; Chinese futures markets;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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