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Cross-correlations between spot and futures markets of nonferrous metals

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  • Liu, Li
  • Wang, Yudong

Abstract

In this paper, we investigate cross-correlations between nonferrous metal spot and futures markets using detrended cross-correlation analysis (DCCA). We find the existence of significant cross-correlations for both return and volatility series. The DCCA-based cross-correlation coefficients are very high and decrease with the futures maturity increases. Using the multifractal extension of DCCA, the multifractality in cross-correlations is revealed. We also detect the source of cross-correlations between spot and futures markets. We use the vector error correction model and bivariate BEKK–GARCH to model the interactions between returns and volatilities of spot and futures, respectively. Our findings indicate that the volatility spillover between spot and futures markets contributes major to nonlinear cross-correlation while the contribution of mean spillover is very minor.

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  • Liu, Li & Wang, Yudong, 2014. "Cross-correlations between spot and futures markets of nonferrous metals," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 400(C), pages 20-30.
    • Handle: RePEc:eee:phsmap:v:400:y:2014:i:c:p:20-30
    DOI: 10.1016/j.physa.2014.01.009
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    8. Tsuji, Chikashi, 2018. "Return transmission and asymmetric volatility spillovers between oil futures and oil equities: New DCC-MEGARCH analyses," Economic Modelling, Elsevier, vol. 74(C), pages 167-185.
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