| Professor Merton Miller, Nobel prize winner of Economics, once said:"The system of economic without futures market can not be called as market economy." With the increasing size of Chinese treasury market, the holders of commercial banks, insurance agencies, urgently need China to launch the treasury future, which aims to hedge and dodge the risks of holding the treasury’s price fluctuations. Facing the increasing louder call of the market, China Financial Futures Exchange (CFFE) launched Chinese5-year simulation trading of the treasury future on13rd,Feb2012; And on6th,Sept2013, the real5-year treasury future trading was listed at CFFE.Professor Merton Miller, once also said,’the charms of futures market lies in allowing you to truly understand the price’. At present, domestic and oversea theorists have studied so much on price discovery function of stock index futures, most of scholars believe that:stock index futures market has special market microstructure which shows as high leveraged,low transaction costs, and short selling mechanism; which leads to the informed traders with information superiority who would choose to firstly trade in the stock index futures market; making stock index futures price more leadingly, comprehensively to absorb and digest the stock market’s innovations (new informations) comparing to the cash price; which caused the better price discovery function of stock index futures than the stock index spot. Therefore, if the study conclusion of the majority of scholars on price discovery function of stock index futures, applies to the treasury futures? Nowadays, studying on price discovery function of the treasury futures is an neglected area, with so less referring relevant domestic and international theoretical literature, which not only caused the author’s interest, but also the starting point and basis points on studying the price discovery function of the treasury futures of author’s paper.On the combination, induction and succession of predecessors points of view the author builds a logical framework of the researches on futures price discovery function, which studies futures price discovery function in two different perspectives:1.compared to futures and cash market’s perspective(1) the first moment to study on the mutual lead-lag relationship of futures and cash prices;(2) the first moment to study the relative contribution to the share of price discovery of futures and cash prices;(3) the second moment to study on mutual volatility spillover effects of futures and cash prices.2.separately study cash market perspective(4) Research on futures market independently affecting the information efficiency of cash market.In this paper, to study futures price discovery function which follows the above2perspectives,4steps gradually to unlock the secretes of futures price discovery function from the shallower to the deeper, and to explore and analyze the internal mechanism and essences of futures price discovery function from every perspectives.In particular, Chapter3of this paper follows Step (1)’s perspective to study the mutual lead-lag relationship of futures and cash prices, with the content of studying the mutual leading direction, the speed of absorbing and digesting the instantaneous change of market’s innovations; Chapter4follows the Step(2)’s perspective to study the relative contribution to the share of price discovery of futures and cash prices, with the research on the rates of merging the same informaitons between futures and cash prices, and on the contribution of long term equilibrium price between futures and cash prices, which precisely reveals the dominant and subordinate position in the price discovery between the treasury futures and the treasury in quantity; Chapter5follows the Step(3)’s perspective to study the direction and size of mutual volatility spillover between the treasury futures and the treasury:Chapter6follows Step(4) to study the launch of the treasury futures’ influences on the information dissemination efficiency, the impact of volatility to the treasury market.Meanwhile, this paper studies with numerous of samples, which includes the United States, Germany, Britain, Japan. South Korea and China’s treasury futures market; through studying numerous of data frequency, including1minute,10minutes, day trading data; by studying many data types, such as real transaction data and the simulation transaction data. In this paper, always adheres to the "make foreign things serve China", the thoughts of "Stones from other hills may serve to polish the jade of this one ", strives to research in the treasury futures price discovery function of the other developed countries, so as to generalize and refine the experience and advice to the development of China’s treasury futures market.This paper is divided into7chapters, each chapter concludes the studies as follows:Chapter1,"Preface".Which mainly introduces the research background, significance, research methods, research ideas, research deficiency and possible innovation points, etc.Chapter2,"The Relevant Basic Theory and Literature Review". The author sorts out and summarizes the logical thinking, research finding of the previous studies on futures price discovery function, and attribute to different studies conclusion caused by the different samples, same samples at different time intervals, different data frequency, different data types and different research methods.Chapter3,"The Mutual lead-lag Relationship Between Treasury Futures and Cash Price Based On First Moment". Firstly, through the comparison on the absolute value of long term adjustment coefficient of the treasury future price and treasury price for the countries such as the United States, Germany, Japan, China, which finds out the bigger adjustment range of the above4countries’s treasury future price’s long-term equilibrium than the treasury market, so it shows the slower speed of the above4countries’s absorbing and digesting the instantaneous change of market’s innovations, the weaker price discovery function of the treasury future market.Secondly, by comparing the United States, Germany, Japan’s long-term adjustment coefficient of symbols, which learns that the Germany10-year bond treasury futures and treasury market is in line with the reverse correction mechanism, this suggests that the Germany treasury futures market and treasury market is the highly effective market; when the market’s innovations takes place instantaneously, Germany investors especially the arbitrager of treasury future and treasury market can discover the pricing deviation of innovations between future and cash prices in time, and correct and narrow the difference of the pricing through arbitrage, makes the stronger linking and synergistic effect of Germany treasury future and treasury market.The United States, Japan’s10-year treasury future and treasury market are not in conformity with the reverse correction mechanism, it shows that the investors of United States, Japanese’s treasury future and treasury market can’t rationally absorb and digest the instantaneous innovations of the market, but to show the overreacting phenomenon (overshooting) to the innovations, which caused United States and Japan’s more delayed pricing time of the basic internal value of the treasury than Germany.Thirdly, through the GIRF modeling, we find out that, the impact of the one s.d. innovation from the treasury market to the treasury future market is more stronger than the impact of the one s.d. innovation from the treasury future market to the treasury market for the countries such as the United States, Germany, Japan, China, which shows that the treasury price lead the treasury future price on the above4countries, so the treasury market plays the dominant role in price discoveryFourthly, the writer thinks that the weaker price discovery function of the treasury future market than the treasury market is due to the simulation transaction is difficult to achieve physical delivery and arbitrage.Chapter4,"The Relative Contribution to the Share of Price Discovery Of The Treasury Future and Treasury Market Based on First Moment". Firstly, the writer uses IS, MIS, PT models to study the contribution to the share of price discovery based on the first moment treasury future and treasury of the United States, Germany, Japan and China, finding that more than95%of the samples support higher contribution to the share of price discovery of treasury rather than that of treasury future, and the treasury market plays the dominant role in price discovery, which is consistent with the findings of Chapter3and5. The writer contributes the results to the following three aspects:a. symmetry of the investors from the treasury future and treasury markets; b. higher market hedgers proportion of the treasury future; c. the fixed-income nature of treasury futures.Secondly, through the analysis on the42consecutive0.5year contribution to the share of price discovery of treasury future and treasury of the United States, the writer finds that in the last decade, the treasury future and treasury contribution shares present time-varying characteristics over time rather than fixed. With modeling, the writers demonstrated that the changes due to the relative liquidity levels, relative transaction costs, relative noise traders proportions of the two market.Chapter5,"The Mutual Volatility Spillover Effects Between Treasury Futures and Treasury Prices Based on Second Moment." Firstly, bivariate models of VECM-BEKK-GARCH, VECM-CCC-GARCH, VECM-DCC-GARCH are used to study the mutual volatility spillover effects between treasury futures and treasury prices of the United States and Germany, and the results show that the volatility spillover effects of treasury prices on treasury future prices are more statistically significant and the treasury market plays the key role in price discovery, which are consistent with the conclusions of Chapter3and4.Secondly, all of the3models show high dynamic correlation coefficients, fixed correlation coefficients of the treasury futures and treasury market, indicating that there is strong linkage and correlation between treasury futures and treasury markets in the United States and Germany. When innovation generates, both futures and treasury markets react to the innovation and transfer the innovation between each other through arbitrage operations, thus affecting the market prices.Thirdly, the results of the3models show that the dynamic correlation coefficients, fixed correlation coefficients of German treasury future price and treasury price are higher than that of American, further confirming the conclusion of Chapter3that in VECM model the effectiveness of German treasury and treasury futures is higher than that of the American.Chapter6,"Effect Of Treasury Future Market on the Information Efficiency of Treasury Market".. Firstly, by using first moment and second moment perspectives, the writer proves that the price discovery function of treasury future is weaker than that of treasury in Chapter3,4and5, however, there is bottleneck to study the price discovery function of treasury future. Therefore, different research perspective is adopted to separately study the effect of treasury future on the information efficiency of treasury market instead of contrasting the markets of future and cash:Firstly, using ARIMA-GARCH model, the writer finds that the release of treasury future market in the United Kingdom and South Korea adds new channel and market to reflect the innovation of treasury market, which extends the single track treasury market structure into parallel track structure of future and treasury, strengthening the treasury market system, improving the information transmission efficiency of treasury market in corresponding countries. Thus, the price discovery function of treasury future has been proved.Secondly, using the ARIMA-GARCH model, which contains dummy variables, the writer finds that there is no significant effect of the release of treasury future market in the United Kingdom and South Korea on the volatility of treasury market in corresponding countries, indicating that there is no certain causal relationship between the improvement and volatility of treasury market information effectiveness after the release of treasury future.Chapter7,"Conclusions and Recommendations".The price discovery function of treasury future is concluded by studying the researches of the developed countries, and some policy recommendations are suggested for the future development of treasury future market in China from the perspective of price discovery by combining the micro-market theories of liquidity level, transaction costs, proportions of noise traders, hedgers, and proportion of speculators.Innovations in this paper include:(1) idea:a logical framework with two perspectives four steps is constructed for the analysis of the price discovery function of the price of future;(2) topic:the price discovery function of "treasury future" is quantitatively analyzed for the first time by using the mentioned logical framework;(3) empirical research methods:the generalized impulse response function GIRF is used for the first time in China to study the price discovery function of treasury future on studying the lead-lag relationship between treasury future and price of cash; studying on the contribution to the share of price discovery of treasury future, the IS model、MIS model and PT model are used to study the price discovery function of treasury future for the first time in China, which also simultaneously contrasted the empirical findings of models IS, MIS and PT, avoiding the dependence of conclusion on models; the VECM-BEKK-GARCH, VECM-CCC-GARCH and VECM-DCC-GARCH models are initially used for the study of the mutual volatility spillover effects between treasury future price and treasury price, which also contrasts the empirical findings of models VECM-BEKK-GARCH, VECM-CCC-GARCH, VECM-DCC-GARCH, avoiding the dependence of conclusion on models; in the study of the effect of treasury future market on the information effectiveness of treasury market, the ARIMA-GARCH model, which contains dummy variables is adopted for the study of price discovery function of treasury future for the first time in China;(4) theoretical analysis methods:the empirical findings in Chapter3,4,5and6are demonstrated from the microstructure of treasury future and treasury market, such as the distribution characteristics of institutional investors in treasury future and treasury market, the proportions of hedgers in treasury future market, the characters of treasury as fixed income product, the relative liquidity level of treasury future and treasury market, the relative transaction costs, the relative proportions of noise traders, which is also new in the study of this area in China. |
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