Study On Relation Of Liquidity And Volatility In China's Soybean

Liquidity and volatility are two main contents of futures market efficiency, measuring the development degree of futures market. Both international and domestic scholars used to focus on the study of liquidity itself and the factors that influent liquidity, such as the liquidity definition, liquidity measuring indices, etc, without much study of the relationship between liquidity and volatility. The purpose of this dissertation is to expand past people's study, and discuss the relationship between liquidity and volatility in China's soybean future market by both theory study and empirical study. It is good for improving the efficiency of China's soybean futures market to study the relationship of liquidity and volatility.To lucubrate the relationship between liquidity and volatility in China's soybean future market, the dissertation adopts theory study and empirical study, as well as qualitative analysis and quantitative analysis. On the basis of a great deal of related data, the dissertation first gives an explicit definition of liquidity, as well as macro-liquidity and micro-liquidity. Macro-liquidity reflects the trading activity of futures market, while micro-liquidity reflects the ability to trade with low cost as soon as possible. With the theories of market microstructure and behavior finance, taking volume as macro-liquidity index, this dissertation discovers that volume has a positive relationship with volatility and un-anticipated volume caused by new information has more influence with volatility than anticipated volume. This result complies with the mixture distribution hypothesis. As to the micro-liquidity index, this dissertation chooses Illiquidity and discovers that micro-liquidity index has no obvious relationship with volatility in China's soybean futures market.The innovative result is that this dissertation discovers the diploid relationship between liquidity and volatility in China's soybean market. The result of the research can help market anticipants to make better investing and supervising plans.