Information Transmission between LME and SHFE in Copper Futures Markets

The relationships of information transmission and transmission speeds between the London Metal Exchange(LME)and the Shanghai Futures Exchange(SHFE)in metal futures markets are examined by using the metal futures daily data in LME and SHFE respectively through the bivariate EGARCH model based on studentt distribution and the speed analysis of information transmission models.The empirical results show that there are significant bi-directional price lead relationship and bi-directional volatility spillover in copper futures market.Although being a significant bi-directional price lead relationship in aluminum futures market,there is not significant relationship in volatility spillover between LME and SHFE.Moreover,the information transmission across the two futures markets appears to be rapid,as trading information in one market can be absorbed in another market within a trading day.As a whole,the metal futures market of LME has a stronger effect than that of SHFE and plays a dominant role in transmitting information.