The Relationship Between China's Real Estate Market and Industrial Metals Futures Market: Evidence from Non-price Measures of the Real Estate Market

摘要

By using non-price indicators of the real estate market, this paper examines the relationship between the real estate market and the industrial metals futures market in China during the 2004-2019 period. Empirical findings from a vector autoregres-sion model (VAR), a causality study, and cointegration analysis suggest that, in the context of China, industrial metals futures have both short-run and long-run associations with the real estate market. The effectiveness of the mechanisms through which the real estate market affects the industrial metals futures market, however, varies across underlying assets and pre-specified indicators. More specifically, the shock of the size of newly started constructions has the greatest accumulated impacts on the copper futures market, increasing the price of copper futures by 2.46% after two years. Additionally, 11.31% of the changes in the price of copper futures can be attributed to fluctuations in the size of newly started constructions, in which the explanatory power has increased horizontally. The results of impulse response functions (IRFs) show that the price of rebar futures is the most sensitive to volatility in sales size in the real estate market, in which the rebar futures price can be expected to increase by 1.65% after two years. The results of the forecast error variance decomposition (FEVD) method suggest that fixed asset investment in the real estate market makes the largest contribution (about 6.28%) to corresponding movements in the rebar futures price.