China's Soybean Futures Market Price Discovery Function Of The Empirical Research

Futures,as a financial derivative instruments of great importance,which is developed by the spot exchange,has the characteristics as followed: high flowability,flexibility of risk-control,etc. the foundation of CBOT(The Chicago Board of Trade) in 1848 acts as the symbol that the futures has officially came on the stage of the world's history.Far more before.the market of futures emerged in our nation and developed rapidly.on 12th oct 1990,the wholesale market of commissary of Zhengzhou opened.and it marked the first step of futures market in the new period of China. Nevertheless,the market didn't work as expected involving the blind expand and the failure of supervise.After that,some plans were make,including clean-up and rectification structural readjustment which brought the market to its golden age.In 2009,with the volume of 822564522and the total value peaked to 3,76437 billion, the Commodity Exchange of Dalian has became one of the most influencial agricultural products' Commodity Exchange of the world which has a remarkable effect of international price fixing.The futures market plays an vital role in modern economy which contains two main functions:price discovery and hedging.hedging is trading a certain goods with equal quantity but in opposite orientation.That is buying or selling the equal futures when buying or selling the actuals. After a period of time.the profit and loss in futures trade could make up to that provoked by the trade of actuals.In this way,a hedging institution will be built between the actuals and futures in order to reduce the risks of prices to their minimum both in short and long terms;as for price discovery,it is a process to build an institution of pubic,justified,efficient and competitive to form a price of real,predictable.successive, authoritative.the hedging is built upon the price discovery.which is regarded as the most important function of future market,and also stands for the matureness as well as the efficiency of the market.China is the forth greatest source area of soybeans.However,as the the economy and the living standard soar,our country has became the biggest importing country to satisfy the needs.In the mean time.China will turn to the No 1 country of consumption.As a consequence,to make a research over the price system,price discovery and the market efficiency of Chinese futures market of soybeans owes a great significance.In this essay,unit root tests,cointegration tests,granger causality tes,model analysis of SVAR,impulse response function,variance decomposition are used to demonstrate the price discovery of the future market of soybean of our nation.The research manifests:(1) Great reciprocity exists in the prices between the futures and actuals of soybean,of which,the factor reaches 0.943477,in the case of soybean,the prices of futures vary before the actuals. In long term,the prices of futures leads these of actuals tightly.(2)The price of actuals of soybeans has the function of price discovery and it remains an acceptable level:in long term,the relationship between prices of futures and actuals is one-way causation,not the mutual cause-effect relationship,the price of futures is the reason and this of actuals is the consequence.in short term,these two factors share a short run equilibrium.it means that the two factors have a mutual regulation.and the influence of futures trumps that of actuals when a diversion shows up.Briefly,the futures market of soybean has greater function in price discovery than actuals market.According to the result of the tests,it is easily to be seen that the price discovery in futures market of soybean of China has limited functions. While,the obstacles which influence its price still exist affecting its better function.For example:(1)the one-way causation interrupt the price discovery;(2)the futures market of soybean of China is not so authoritative to influence the price discovery;(3)the efficiency of market needs to be improved though the market itself owes the function of price discovery.Eventually,this article has some advices about the policies aiming at these problems,including:bettering the system of actuals market of soybean;encouraging the cultivation of soybeans to improve the international competition of the soybeans of our nation;holding a training session for the participants restraining the overspeculation improving the organizations.it is hoped that these advices could help the improvement of the futures market of soybeans of China.