Assessing the functional efficiency of agricultural futures markets in China

Ju, Ronghua; Zhiling, Yang

doi:10.1108/caer-03-2018-0056

Cited by 11 publications

(7 citation statements)

References 14 publications

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“…In summary, the results indicated that corn futures prices had lead power and wheat futures prices had no lead power, which is the same as the results reported by Ronghua and Zhiling (2019). Additionally, soybean futures prices had leading power, and the lead power of the soybean futures price was stronger than that of corn futures prices.…”

Section: Discussionsupporting

confidence: 81%

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Price Risks and the Lead-Lag Relationship between the Futures and Spot Prices of Soybean, Wheat and Corn

Koike

2020

Asian Journal of Economic Modelling

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Faced that the dynamics of the global economy and international politics has produced price risks in the agricultural commodity markets of some countries, we study the leadlag relationship between the futures and spot prices and market volatility of staple commodities to help make forecasts and manage risk. We design some indexes -"longterm equilibrium", "power of short-term error correction", " Granger causality", "share of information" and "spillover effect" to quantify the lead-lag relationship. Characteristics of futures prices are analyzed with statistical methods and E-GARCH model. The results suggest that spot prices can incorporate the information in futures prices, and move affected by futures prices. This study also identifies the characteristics of trends such as seasonality and asymmetric volatility, which sheds light on some of the key price risks in these commodity markets. In addition, when a commodity is to be harvested or its price affected by bullish news and policies, regulators and traders should pay more attention to price risks, particularly for types of futures with longlasting volatility, such as soybeans.Contribution/ Originality: The paper's primary contribution is finding important implications to farmers, governors, and traders of staple agricultural futures by providing empirical evidence of the lead-lag relationship between futures price and spot price of the agricultural products and precautions against grain price risks. INTRODUCTIONManaging price volatility risks is always a vital priority to traders and governments in agricultural markets. In recent years, price volatility in major agricultural markets in China has been drastic. As Arnade, Cooke, and Gale (2017) and Hernandez, Ibarra, and Trupkin (2014) pointed out, volatility transmission across exchanges for some grain commodities in China and other countries exists. So long as trade frictions exist, such as the trade friction between China and the US and between Korea and Japan, commodity prices will be affected by factors across countries and may fluctuate greatly. Managing price volatility risks in agricultural markets should be taken very seriously because agriculture is a highly important sector-responsible for food security, poverty alleviation, and even ensuring societal stability.Confronted with these risks, some researchers suggest futures varieties should be applied as a means of managing sharp volatility or price risks in spot prices. However, some researchers reveal futures varieties may make commodity price volatility even more drastic. In theory, as a forecast, futures prices serve the function of price discovery, for which they are considered to be the primary tool. They lead the spot price to arrive at its equilibrium,

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Section: Discussionsupporting

confidence: 81%

“…Yang and Zhang (2013) found that soybean futures prices predicted more than 70% of its spot price movements. However, Ronghua and Zhiling (2019) identified that the corn futures market showed this leading role, but the wheat market did not.…”

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confidence: 99%

Price Risks and the Lead-Lag Relationship between the Futures and Spot Prices of Soybean, Wheat and Corn

Koike

2020

Asian Journal of Economic Modelling

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“…Judging from market activity and price fluctuations, China's futures market does not appear to be overreacted to information (LIU et al, 2020). Affected by factors such as spot market dependence, contract maturity, and trading activity, China's corn and soybean futures markets are the most efficient, while the wheat futures market is relatively inefficient (JU & YANG, 2018).…”

Section: Weak Form Efficiency Of Futures Marketmentioning

confidence: 99%

The shocks and integrations of COVID-19 pandemic on Chinese agricultural markets: comparative empirical evidence from China and other countries

Hou,

Cheng,

Liu

et al. 2024

Cienc. Rural

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We use the ARIMA-GARCH model to estimate the shocks of COVID-19 on Chinese agricultural markets and utilize the ARDL-ECM model to estimate the integration relationships between Chinese and international agricultural markets which are based on the effective market hypothesis theory and daily trading data of US, UK, China and India. The main study findings showed that COVID-19 has a significant negative impact on agricultural product market, specifically, India suffered with the greatest negative impact, followed by the UK, the US and China. Further, this study results revealed that Chinese grain markets that are considered strategic places have not been separated from international markets, but there still exist segmentation phenomena among non-strategic agricultural markets.

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“…Empirical studies have examined the functional efficiency of Chinese agricultural futures markets (Demir et al., 2019; Ju & Yang, 2019; Li & Xiong, 2021; Liu et al., 2020). However, these studies focus on only one or two aspects of market quality, price discovery and hedging effectiveness.…”

Section: Literature Reviewmentioning

confidence: 99%

Is China's new live hog futures market efficient? Evidence from an analysis of market quality, price discovery and hedging effectiveness

Li,

Xiong

2023

Aus J Agri & Res Econ

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On 8 January 2021, China's first live‐animal and live‐delivery futures product—in live hogs—was listed on the Dalian Commodity Exchange to serve as a risk management tool. We examine whether this newly established market exhibits good market quality and has realised its primary functions of price discovery and hedging. Our results suggest that the live hog futures market performs its price discovery function well and can hedge between 4% and 27% of the risk in the spot market, even though it is less actively traded, less liquid and more volatile than egg futures markets. To strengthen the hedging function of the live hog futures market, more effort—such as recruiting market makers and introducing night trading sessions—should be exerted to increase and smooth trading and stabilise volatility.

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Assessing the functional efficiency of agricultural futures markets in China

Cited by 11 publications

References 14 publications

Price Risks and the Lead-Lag Relationship between the Futures and Spot Prices of Soybean, Wheat and Corn

Price Risks and the Lead-Lag Relationship between the Futures and Spot Prices of Soybean, Wheat and Corn

The shocks and integrations of COVID-19 pandemic on Chinese agricultural markets: comparative empirical evidence from China and other countries

Is China's new live hog futures market efficient? Evidence from an analysis of market quality, price discovery and hedging effectiveness

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