Studies On Traders' Interactions In Chinese Futures Markets

Are Chinese futures markets efficient? How does the linkage between domestic and international futures markets influence Chinese futures markets? To answer the above questions, we explore the dynamic process of traders'interactions in Chinese futures markets. Since there have been many statistical studies on Chinese futures markets efficiency and the linkage between domestic and international markets, our study shifts to the micro-level of futures markets dynamics and tries to she light on the issues about Chinese futures markets efficiency and the linkage between domestic and international markets.Traders'interaction models put emphasis on liquidity supply volatility while traditional futures models which describe the dynamic futures price volatility are based on the expected utility maximization. Our Study takes advantage of academic achievements in the field of behavioral finance and market manipulation to describe the traders'interaction process in Chinese futures markets. Furthermore, we design the empirical tests based on the logic of traders'interaction to examine the efficiency of Chinese futures markets and the efficiency of price limits in Chinese futures markets.The main work and conclusion are as following:1. We examine the linkage between domestic and international futures markets from inter-market arbitrageurs'perspective. DHS model is used to explain the short-term and long-term patterns of the domestic price / international price ratio. Through an empirical study of daily international futures, domestic futures and domestic spot prices of copper, aluminum and soybean we think that speculators'overconfidence in international markets'signals and under-confidence in domestic markets'signals contribute significantly to the volatility of the ratio.2. We uses a model of traders'interaction based on MWZ model's frame to examine Chinese futures markets form the perspective of liquidity constraints on squeeze strategies and gives a related case study on SHFE copper futures matket. Traders'interaction exerts"implicit"risk control on market manipulation and regulatory agencies should combine the implicit and explicit risk control.3. We examines overreaction in Chinese futures markets and the empirical results show that there is no systematic overreaction in SHFE copper, SHFE aluminum, SHFE rubber, DCE soybean and CZCE wheat markets. We examine the linkage between domestic and international futures markets based on Johansen's co-integration test and variance decomposition and the results show that the domestic markets are dominated by domestic signals. Thus from the perspective of overreaction and linkage between domestic and international futures markets Chinese futures markets are efficient.4. We design the empirical tests based on traders'interaction to examine the efficiency of price limits in Chinese futures markets. Our empirical studies on SHFE copper price limits show that SHFE copper price limits are not efficient in that price limits can't cool noise trading when the prices are falling.The primary innovations in this thesis are summarized in the following.:1. Build a Chinese futures markets DHS model and take empirical studies.2. Build a Chinese futures markets MWZ model and take case studies.3. Design empirical tests based on the logic of traders'interaction to examine the efficiency of Chinese futures markets.4. Design empirical tests based on the logic of traders'interaction to examine the efficiency of price limits in Chinese futures markets.