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Received: 2007-03-22

Revision Accepted: 2007-05-11

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Journal of Zhejiang University SCIENCE A 2007 Vol.8 No.8 P.1290~1295

10.1631/jzus.2007.A1290


Study on spillover effect of copper futures between LME and SHFE using wavelet multiresolution analysis


Author(s):  WANG Su-nan, PAN Yun-he, YANG Jian-gang

Affiliation(s):  School of Computer Science and Technology, Zhejiang University, Hangzhou 310027, China; more

Corresponding email(s):   Wangsn@spdb.com.cn

Key Words:  Spillover effect, Copper future, Future market, Wavelet multiresolution analysis


WANG Su-nan, PAN Yun-he, YANG Jian-gang. Study on spillover effect of copper futures between LME and SHFE using wavelet multiresolution analysis[J]. Journal of Zhejiang University Science A, 2007, 8(8): 1290~1295.

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author="WANG Su-nan, PAN Yun-he, YANG Jian-gang",
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%A YANG Jian-gang
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%DOI 10.1631/jzus.2007.A1290

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T1 - Study on spillover effect of copper futures between LME and SHFE using wavelet multiresolution analysis
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EP - 1295
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PB - Zhejiang University Press & Springer
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DOI - 10.1631/jzus.2007.A1290


Abstract: 
Research on information spillover effects between financial markets remains active in the economic community. A Granger-type model has recently been used to investigate the spillover between London Metal Exchange (LME) and Shanghai Futures Exchange (SHFE), however, possible correlation between the future price and return on different time scales have been ignored. In this paper, wavelet multiresolution decomposition is used to investigate the spillover effects of copper future returns between the two markets. The daily return time series are decomposed on 2n (n=1, …, 6) frequency bands through wavelet multiresolution analysis. The correlation between the two markets is studied with decomposed data. It is shown that high frequency detail components represent much more energy than low-frequency smooth components. The relation between copper future daily returns in LME and that in SHFE are different on different time scales. The fluctuations of the copper future daily returns in LME have large effect on that in SHFE in 32-day scale, but small effect in high frequency scales. It also has evidence that strong effects exist between LME and SHFE for monthly responses of the copper futures but not for daily responses.

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Reference

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