A Study On Price Fluctuations And Price Transitive Of Chinese Cocoon And Silk

Since the market is still in its infancy, the price mechanism of Chinese cocoon and silk industry is still imperfect. Frequent fluctuations in the price of cocoon and silk has been a major obstacle to the development of the cocoon and silk industry. The whole cocoon and silk industry involves nearly20million silkworm raisers and nearly1million workers. Its output value reachs170billion yuan and plays important part of our agricultural economy. Solving the problem of price fluctuations and price transitive is major theoretical and practical significant for understanding the law of the operation of the market, coordinating silkworm raisers and enterprises, enhancing the relevance and effectiveness of government intervention. Existing studies have not yet given a satisfactory explanation and analysis to the specific mode (transmission direction, magnitude, time and other issues) about the laws of cocoon and silk price volatility and price transmission. In addition, Dried cocoon and raw silk are traded on Chinese cocoon and silk futures market, so far no one has conducted a detailed empirical quantitative research about whether futures price plays a leading role and stabilizes the cocoon and silk price fluctuations or futures price fuels the negative effects due to speculation.Firstly, according to annual price data of fresh cocoon, dried cocoon, raw silk, gray silk fabric and clothing, this paper uses a simple correlation coefficient, cv coefficient of variation, hp filtering to do the descriptive analysis in the purpose of revealing the law of price fluctuations in Chinese cocoon and silk industry; then, according to the Granger causality tests, vector autoregression model (VAR) and impulse response functions and variance decomposition methods, this paper characterizes the direction, intensity and time delay of price transmission of Chinese cocoon and silk vertical related chain in the purpose of testing the symmetric of the vertical price transmission of Chinese cocoon and silk industry. Then, this paper uses the weekly spot prices and futures prices of cocoon and silk to analysis price fluctuations and price transitive of the vertically related market. This article will use Granger causality test, APT model and impulse response models to analysis price volatility and price transmission of the spot price and the short, medium and long futures prices. Then, the paper will study the dynamic relationship between the spot price and the futures price of cocoon and silk with the help of date and information published by Chinese silk trading market. we choose the statistics of261weeks of two spot e-trading varieties——Cocoon A and Raw Silk B, and two corresponding spot trading varieties——dried cocoons and white steam filature(20/22D, factory inspection). We take advantages of the correlation analysis, the cointegration analysis, Granger causality analysis and the GS test to study the dynamic relationship of futures price and spot price.The analysis results are as follows:Firstly, the general rules of Chinese cocoon and silk market’s price fluctuations are:there exists a high correlation between Chinese cocoon and silk vertical related prices; the volatility of fresh cocoon’s price is the strongest and the volatility weakened as with vertical related industry chain, which shows that sericulturist bear the greatest price volatility; price fluctuations of clothing are second only to cocoon price’s. Volatility of futures price of cocoon and silk grows with the delivery period; there exists a slight change around2002in the trends of annual prices fluctuations. Secondly, the price transmission modes of Chinese cocoon and silk vertical related market are:price transmission of vertical related industries chain——fresh cocoon, dried cocoon, raw silk and gray silk fabric shows that there exists asymmetry mutual price transitive, which can be seen in the magnitude and reaction lags of transmission. This may indicates the asymmetry of market power, lack of market-oriented pricing mechanism and imperfect of price adjustments etc.; silk factory’s response to dried cocoon’s impulse in different directions is symmetric; the weekly spot prices of cocoon and silk shows that vertical price transmission is satisfactory, transmission intensity and reaction lags are basically symmetric. However, the effect of vertical price transmission measured by the futures price is a bit confusing. And with the growth of delivery period, the results are more inconsistent with the general logic; price of raw silk is closely linked to the price of the other three groups and plays a central role in the process of price transmission. Thirdly, the evaluation of the efficiency of Chinese silk trading market is:there exists futures price discovery function in Chinese silk trading market, futures price of raw silk is more efficient than futures price of dried cocoon. The price discovery function grows with the delivery period; Because of speculation on cocoon and silk futures market, the price leading function of spot prices is weaker than the price leading function of futures prices, futures price is inconsistent with the fundamentals, which is the reason of the inefficiency of cocoon and silk vertical price transmission measured by annual price. Fourthly, volatility of the price of Chinese cocoon and silk is big and there exists lack of law in the price transmission of cocoon and silk vertical related industry. There are a lot of problems in Chinese cocoon and silk market: asymmetry of market power, lack of market-oriented pricing mechanism, imperfect of price adjustment mechanism, the speculative activities and other issues, which leads to incomplete, asymmetry and untimely of vertical price transmission in Chinese cocoon and silk market. Which restricted the development of the market, the interests of silkworm raisers are difficult to be guaranteed.Based on the analysis and conclusions above, the paper recommends more silkworm raisers favorable policies, more market-oriented pricing mechanism. We also suggest the government regulate the speculation in the futures market. Thus we can make price of Chinese cocoon and silk behaves more stable and more regular. Then we can make Chinese cocoon and silk industry continue to grow and develop.