Long-Term Cointegration and Short-Term Asymmetric Adjustment——An Empirical Study on the Linkage Between Copper Futures and Nonferrous Metals ETF Returns

Abstract

To reveal the long-term cointegration relationship and short-term asymmetric adjustment characteristics between copper futures and nonferrous metals ETF returns, this paper takes the prices of copper futures and the Southern CSI SW Nonferrous Metals ETF (512400) from January 3,2018 to December 31,2024 as the research objects for cointegration test, and the corresponding returns for short-term dynamic analysis. Based on daily data, 82 groups of monthly samples are obtained. An empirical framework of “stationarity test – cointegration test – error correction model – VAR model – Granger causality test – impulse response function – variance decomposition” is constructed to conduct an in-depth analysis of the linkage mechanism between the two. The results show that: in the long run, there exists a significant and stable cointegration relationship between copper futures price and nonferrous metals ETF price; in the short run, the relationship of their returns exhibits obvious asymmetric adjustment characteristics. The Granger causality test indicates that copper futures returns are a one-way Granger cause of nonferrous metals ETF returns, reflecting the price discovery function of the futures market. The impulse response analysis and variance decomposition results further show that the impact of copper futures returns on ETF returns is limited in the short term, but its contribution increases significantly in the medium and long term. Overall, the linkage between copper futures and nonferrous metals ETF returns presents a structure characterized by “long-term cointegration of prices, short-term asymmetric adjustment of returns, futures-market dominance, and lagged effects.” The findings not only verify the linkage between commodity futures and related industry ETFs, but also provide useful references for cross-market investment decisions, risk hedging, and regulatory authorities in preventing systemic risks.