An empirical analysis of the price discovery function of Shanghai fuel oil futures market

Abstract

This paper analyzes the role of price discovery of Shanghai fuel oilfutures market by using methods, such as unit root test, co-integrationtest, error correction model, Granger causality test, impulse-responsefunction and variance decomposition. The results showed that thereexists a strong relationship between the spot price of Huangpu fuel oilspot market and the futures price of Shanghai fuel oil futures market.In addition, the Shanghai fuel oil futures market exhibits a highlyeffective price discovery function.