Pricing Efficiency Of Chinese Agricultural Futures Markets

Futures market is the inevitable outcome of spot market which has developed tocertain stages. The price discovery function and hedging function of futures market isconducive to directing the price of spot market, to stabilizing the supply and demand,and to assuring the interest of manufacture. China is a great agrarian country andboasts of a large population. Grain security is of vital importance to the economic andsocial development. In futures market, the exertion of market function depends on thepricing efficiency. Therefore, the research of pricing efficiency of Chinese agriculturalfutures market has realistic significance.In this thesis, correlation analysis, co-integration test, Granger causality test andimpulse response function are adopted to conduct pricing efficiency test of soybeanoil, soybean meal and corn in Chinese agricultural stocks market. According to theresult of correlation analysis, the futures prices of soybean oil and soybean meal haverelatively strong correlation with spot prices, while for corn, the correlation isrelatively weak. After co-integration test, it could be concluded that the futures andspot prices of soybean oil and soybean meal maintain long-term stable relations, whilefor corn, it is not co-integrated. Further Granger causality test reveals that the futuresand spot prices of soybean oil and soybean meal maintain reciprocal causationrelations, which illustrates that futures market can effectively guide the spot market,and meanwhile spot market also has effect on futures market. While the futures priceof corn is not the Granger reason of spot price, hence the futures market of corncannot guide the spot market. The impulse response function offers further evidenceto the conclusion reached beforehand.Through empirical analysis, it could be stated that most of the Chineseagricultural stocks species have pricing efficiency, and agricultural stocks market caneffectively guide the spot market. However, some of the agricultural stocks speciesare not mature and do not bear pricing efficiency. Furthermore, this thesis conductedanalysis to the elements affecting the pricing efficiency of futures market.This thesis conducted analysis to the influencing factors of spot and futuresmarket in two aspects. In spot market, there are minimum protective prices for someagricultural products, and the informationization degree is low. These factors canaffect the prices of spot market which is determined by supply and demand. On theother hand, the development of logistics affects the transaction cost and marketactivity level, and it further affects the prices of spot and futures market. In futures market, the proportion of speculators is too high, the scale and scope of business offutures companies are small, the number of listed varieties is small, and the structureis not complete. All abovementioned factors can have negative effect on the pricingefficiency. The risk management system, delivery system and settlement system canaffect the liquidity and restrict the pricing efficiency through restricting thetransaction cost of futures market. Thorough system of laws and regulations canguarantee the efficient operation of futures market.