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Information transmission in informationally linked markets: Evidence from US and Chinese commodity futures markets

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  • Liu, Qingfu
  • An, Yunbi
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    Abstract

    This paper investigates information transmission and price discovery in informationally linked markets within the multivariate generalized autoregressive conditional heteroskedasticity and information share frameworks. Based on both synchronous and non-synchronous trading information from Chinese futures/spot markets, the New York Mercantile Exchange (NYMEX), Chicago Board of Trade (CBOT), and CME Globex futures markets for copper and soybeans, we show that there is a bidirectional relationship in terms of price and volatility spillovers between US and Chinese markets, with a stronger effect from US to Chinese markets than the other way around. Additionally, the NYMEX and CBOT play a more important role than the CME Globex in the flow of information from US to Chinese markets. Moreover, we find that Chinese copper market adjusts more quickly than the NYMEX copper market to correct the disparity between both markets. However, the converse is true in the case of soybeans. Finally, our results highlight the remarkable role of Chinese futures markets in the price formation process, though NYMEX and CBOT futures markets are the main driving force in price discovery.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Money and Finance.

    Volume (Year): 30 (2011)
    Issue (Month): 5 (September)
    Pages: 778-795

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    Handle: RePEc:eee:jimfin:v:30:y:2011:i:5:p:778-795

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    Web page: http://www.elsevier.com/locate/inca/30443

    Related research

    Keywords: Commodity futures Informationally linked markets Synchronous and non-synchronous trading Price discovery;

    References

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    1. repec:fth:louvco:2001/28 is not listed on IDEAS
    2. GRAMMIG, Joachim & MELVIN, Michael & SCHLAG, Christian, 2001. "Price discovery in international equity trading," CORE Discussion Papers 2001028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    4. Hasbrouck, Joel, 1995. " One Security, Many Markets: Determining the Contributions to Price Discovery," Journal of Finance, American Finance Association, vol. 50(4), pages 1175-99, September.
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    7. Ding, David K. & Harris, Frederick H. deB. & Lau, Sie Ting & McInish, Thomas H., 1999. "An investigation of price discovery in informationally-linked markets: equity trading in Malaysia and Singapore," Journal of Multinational Financial Management, Elsevier, vol. 9(3-4), pages 317-329, November.
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    Citations

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    Cited by:
    1. Libo Yin & Liyan Han, 2013. "Exogenous Shocks and Information Transmission in Global Copper Futures Markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 33(8), pages 724-751, 08.
    2. Liu, Qingfu & Wong, Ieokhou & An, Yunbi & Zhang, Jinqing, 2014. "Asymmetric Information and Volatility Forecasting in Commodity Futures Markets," Pacific-Basin Finance Journal, Elsevier, vol. 26(C), pages 79-97.
    3. Sinha, Pankaj & Mathur, Kritika, 2013. "Price, Return and Volatility Linkages of Base Metal Futures traded in India," MPRA Paper 47864, University Library of Munich, Germany.

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