Time-frequency co-movements between the largest nonferrous metal futures markets

Abstract

This study contributes to the literature on metal commodity market co-movement by studying its dynamics in the time-frequency domain. The novelty of our approach lies in the application of wavelet coherence analysis to nonferrous metal futures markets in Shanghai and London. We show that London's nonferrous futures market generally leads Shanghai's market, especially in the medium-run. In addition, Shanghai's market leads London's market in the case of aluminium and zinc in the long-run, with implications for long-term investors. In particular, we observe strong causal effects for 2008–2014, indicating that market turmoil intensifies the causality between the markets.