The Research On The Effect Of Futures Trading On Spot Price Volatility In Chinese Agriculture Markets

It is not plain sailing for the development of the international agricultural product futures market. Especially, in the initial period of the futures market, a universal problem that whether the introduction of the futures swaps would increase the volatility of the sport price puzzled most of the countries. The Chinese agricultural product futures market has developed for just more ten years since it set up, but the problem also affects this youthful futures market. Price discovering and risk dodging are two main functions of futures market, because the function of the futures exchange has the positive effect on the spot price. However, if the futures exchange increases the volatility of the spot price, it means futures exchange brings a negative effect on the spot market. Therefore, the net effect between the futures market and the spot market will decide future of the Chinese agricultural product futures market. This dissertation will utilize two methods, the theoretical analysis and the real diagnosis, to discuss the question that whether the futures exchange will increase the volatility of the spot price. Furthermore, combining the development situation of the Chinese agriculture product futures market, dissertation will further investigates and discusses the above problem.There are four chapters in the dissertation :First chapter is the introduction. It mainly introduces the article research background, the research significance and the related literature of the domestic and foreign countries.Second chapter is the theoretical analysis. Based on the relative fundamental research, the chapter will analyze whether the convergence mechanism exist between the futures and spot price theoretically. The analysis result indicates that the theoretical model has a bigger flaw, and has the limitation in the practical application. So the result of the theoretical analysis can not get a convinced conclusion and it also put forward the necessity of the real diagnosis research.The third chapter is the real diagnosis research. The research objects are the Chinese corn futures and the sugar futures. Firstly, the chapter uses the Granger causality test to analyze the Guide relations between the volatility rate of futures price and spot price, and then utilizes the GARCH model to establish two volatility models. The former one is for the spot price before the futures enter the market, and the latter one is for the spot price after the futures come into the financial market. Empirical results show that the rate of price volatility in futures plays a guiding role on the spot price. However, Chinese agricultural products futures exchange decreases the volatility of spot price.The fourth chapter is the enlightenment and the suggestion. In this part, the result of the real diagnosis research has been pondered and excavated more deeply, and some valuable enlightenment also has been brought. Regarding to the problems of the Chinese agricultural product futures market, the fourth chapter also put forward the corresponding policy proposal.