Principal Factor Analysis on Term Structure of Copper Futures Prices in China

摘要

This article compares two principal factor analysis methods by taking the daily data for futures prices from 2000 to 2009 as sample. First, this article introduces the principal factor analysis methods. Next, the daily data of copper futures prices in China are analyzed, and are tested the stationarity by ADF method. Then, by applying principal factor analysis to the data, it is concluded that these factors can be identified as shifts in the level, the slope, and the curvature of the term structure of futures prices respectively. Finally, the result shows that principal component analysis method can describe the term structure of copper futures prices better than function model method.