An Empirical Study on Risk Contagion in Domestic and Foreign Metal Futures Markets

An Empirical Study on Risk Contagion in Domestic and Foreign Metal Futures Markets


Author:Yi Fang,Yishan Zhang Journal:Journal of Financial Research (China)  Date:2007(5)

Keywords  risk contagion; volatility spillover; variance decomposition

Abstract

This essay investigates “Risk Contagion” in domestic and foreign metal futures markets, and we give a definition of Volatility Spillover Term. Firstly it can be found that domestic market has a special directional volatility spillover from copper (Cu) to aluminum (Al), and the unpredictable behavior leads to Cu market risks being magnified in Al market. Moreover, the main reason of volatility spillover is not the macro-economical factors. Otherwise we also find domestic metal futures market’s dissymmetry on the shocks from macro-economy, and the change of domestic metal futures price’s dissymmetry on the effects of macro-economy. We suggest on managing the risk of Cu future; avoiding to launching new metal futures while there is a big volatility of price of Cu future; and enriching Al future market.


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