Cross-correlations between spot and futures markets of nonferrous metals

Li Liu and Yudong Wang

Physica A: Statistical Mechanics and its Applications, 2014, vol. 400, issue C, 20-30

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.

Keywords: Cross-correlation; Nonferrous metal; Spot and futures; Mean spillover; Volatility spillover (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:400:y:2014:i:c:p:20-30

DOI: 10.1016/j.physa.2014.01.009

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