Research On Price Linkage And Volatility Spillover Effect Of China-US Soybean Futures Market

Soybeans are an important part of China’s food and an important product for the country’s livelihood.At present,China’s soybean production is in short supply and 80%relies on imports.The United States has been an important partner of China in soybean trade and is one of the major importers of soybeans into China.At the same time,the U.S.Chicago Board of Trade holds the pricing power of global soybeans.China’s soybean futures market started relatively late and followed in the footsteps of the U.S.futures market during the exploration phase.With the development of economy and technology,China’s increasing international status,escalating trade frictions between China and the U.S.,and the impact of the new crown epidemic,the relationship between the U.S.and China soybean futures markets has gradually changed.The soybean futures market reflects international soybean information to some extent.Studying the linkage and spillover of soybean futures market is beneficial to government policy makers to better formulate policies,improve soybean pricing discourse and international competitiveness;to futures market regulators to improve the futures market;and to investors to reasonably allocate resources.Copula models are widely used in finance,but few scholars have applied them to the soybean futures market.Based on the Copula function,this paper selects DCE yellow soybean No.1 and CBOT yellow soybean as the research objects.Based on the study of the development of soybean industry and futures market in China and the U.S.,the mechanism of price linkage and spillover effect is explained and the related knowledge involved in the Copula model is introduced,and then the GARCH-variable structure Copula-CoVaR model based on empirical analysis is used to study The GARCH-variable structure Copula-CoVaR model is then used to study the linkage and volatility spillover effects of the two markets.In the study using the GARCH-variable structure Copula-CoVaR model,the GARCH(1,1)function is firstly chosen as the marginal distribution of the two markets’ returns,and then the time-varying t-Copula function is chosen for fitting,and the time-varying coefficients in the parameter estimation of the time-varying t-Copula function are used to form the time-varying graph.Then,Bayesian diagnosis and Z-test are used to find out the variable structure points,and the detected variable structure points are used to divide the time region.The correlation coefficients and risk spillover values of the two markets for the full time period and the sub-time period are calculated by the formula,and the linkage and volatility spillover effects of the two markets are specifically analyzed.The analysis of the empirical results reveals that the linkage between the U.S.and Chinese soybean futures markets has weakened and the correlation coefficient between the two markets has been decreasing.In terms of volatility spillover,there is a two-way spillover between the two futures markets.From a full time horizon,the risk spillover from U.S.soybean futures to Chinese soybean futures is stronger than the risk spillover from Chinese soybean futures to U.S.soybean futures.However,in the time period between the variable structure points,the risk spillover from Chinese soybean futures to U.S.soybean futures is stronger than the risk spillover from U.S.soybean futures to Chinese soybean futures due to the trade war and the new crown epidemic.Based on these findings,this paper makes recommendations from three perspectives: government policymakers,market regulators,and investors.