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The Efficiency of the Chinese Commodity Futures Markets: Development and Empirical Evidence
Author(s) -
Xin Yu,
Chen Gongmeng,
Firth Michael
Publication year - 2006
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/j.1749-124x.2006.00016.x
Subject(s) - futures contract , china , commodity , economics , empirical evidence , financial economics , price discovery , forward market , empirical research , futures market , market economy , philosophy , epistemology , political science , law
This study investigates the efficiency of the Chinese metal futures (i. e. copper and aluminum) traded on China's Shanghai Futures Exchange. First, we thoroughly analyze the development of China's commodity futures markets, which provides a fundamental background. Then we examine the random walk and unbiasedness hypotheses for two metal futures during 1999–2004. Based on the empirical evidence, we argue that China's copper and aluminum futures markets are efficient, and that they aid the process of price discovery because futures prices can be considered as unbiased predictors of future spot prices. We attribute this efficiency to the regulatory changes made in 1999 and the increased financial skills and acumen of the participants in the market. Edited by Xiaoming Feng