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The predictability of the return correlation of futures with different expirations in the Chinese futures market

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  • Hsu, Chih-Hsiang

Abstract

This paper analyzes the return correlations of dominant and next out futures of four major non-ferrous metal futures listed on Shanghai Futures Exchange. Particularly, we study whether the return correlation between futures contracts is associated with their price spread level. The empirical evidence shows that the return correlations are higher when futures markets are in contango than in backwardation. Moreover, the spread between dominant and next out futures contracts predicts their future return correlation. Specifically, the spread positively relates to subsequent 22-day and 66-day return correlations.

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  • Hsu, Chih-Hsiang, 2021. "The predictability of the return correlation of futures with different expirations in the Chinese futures market," Resources Policy, Elsevier, vol. 74(C).
    • Handle: RePEc:eee:jrpoli:v:74:y:2021:i:c:s0301420721004608
    DOI: 10.1016/j.resourpol.2021.102452
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    References listed on IDEAS

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