The Empirical Study On China's Wheat Futures Market

As a large agricultural country, the importance of food can not be overemphasized. However, it should be noted that, although China's grain output is high, the quality of food has been low because China's grain market economic system is still not perfect. Futures markets have originated from the grain market, It has played a facilitating role in the rational development of the grain market.Since the birth of the late 1980s, China's futures market has come through theory to practice exploration. Then the futures market followed by a blindly period of development, There is a serious illegal operations, market manipulation and other acts in the market during this period. In order to standardize the China's futures market and achieve the real useful role of futures market , related departments issued a series of laws and regulations, and reduce the transaction species. Many transaction places and institutions has been shut down. On the right track, China's futures market has become active again with a significant increase in the number of transactions and more varieties.Food safety is related to the national security, Since China's agricultural futures market is underdeveloped and the impact of small-scale peasant economy, China's agricultural products has no pricing power in the international market. Therefore vigorously develop the futures market is conducive not only to the economic development of markets for agricultural products, but also is conducive to China's food security problems.Because of the two main functions prices discovery and risk avoidance, futures market has developed to the present scale in less the 200 years. From the initial grain futures to a variety of live futures, metals futures, and later the financial futures, the futures market becomes more and more diversification, and the transaction value is also growing. So the role of futures market has become increasingly significant. Not only are there hedging transactions, but there also are speculative transactions in the future market, the traders in the market play their respective role.This paper based on the China's wheat futures price data, to get some useful results from the use of econometric model on the analysis of empirical results .In this paper, the representative Yingmai futures was selected as the wheat futures prices for the study.Stationary is the prerequisite for time series modeling study. In this paper, ADF test was used in the China's wheat futures prices and spot prices' stationary test. The results showed that there existed unit root process. Futures market's hedging function depends on the realization of futures prices and spot prices have long-term equilibrium relationship. Cointegration test is designed to test time series' long-term equilibrium relationship. The empirical results show that futures prices and spot prices exists cointegration relationship. That is, from a long-term perspective, the two movements are essentially the same. Granger resolved x cause y problem, by using this method I test the China's wheat futures prices and spot prices of the interaction relationship. The results show that China's futures prices have an impact on the spot price, which means that China's wheat futures has a guiding significance on the cash market. This paper also established a vector error correction model, the interaction was also used to analysis the relationship. Based on the VEC model, I use the Impulse Response Function to find out what will the market respond to the impact. From the results we can see that, when a market gets an impact, the impact on the market itself is obviously greater than the impact of another market, but the role usually very short.For the study of the effectiveness of the market, the paper uses a random walk model of wheat futures market, the results shows that China wheat futures market had not yet reached the effectiveness. Some scholars established the GARCH model based on the chart of the price data, which I think is not well. Although the data showed that prices sequences have the characteristics of ARCH models, but can be found in specific analysis it does not have ARCH effect. Contrast futures in the United States wheat futures market, I think the reason is that the China's futures market still exist more or less problems.