Research On The Price Discovery Function Of China’s Agricultural Futures Market

China is a large agricultural economy and has an important role in global food production and food supply.Agricultural production is affected by price fluctuations of agricultural products,which in turn can reduce the incentive of agricultural producers to cultivate.The emergence of agricultural futures can help agricultural producers effectively mitigate and prevent the risk of agricultural price fluctuations.In recent years,the No.1 document of the Central Government has continuously mentioned the need to give full play to the role of "insurance + futures" in serving the development of rural industries.However,at this stage,there are many shortcomings in China’s agricultural futures market that need to be improved.Therefore,it is very important to understand and master the price changes in the agricultural futures market.The price discovery function of futures,as the core function of the futures market,directly affects the role of the futures market.Research on the price discovery function of China’s agricultural futures is beneficial to agricultural producers to hedge the risk of price fluctuations through the agricultural futures market,to agricultural enterprises to better use the futures market for hedging to lock in operating profits,and to government agencies to carry out macro-control to stabilize agricultural prices and formulate agricultural policies.Based on the theory of financial market effectiveness and the theory of price discovery function of futures,this paper empirically analyzes the price discovery function of agricultural futures in China.The article firstly introduces the development status and price movement rules of China’s agricultural spot market and futures market,so as to analyze the problems of China’s agricultural spot market and futures market at present.The article adopts three major grain crops,japonica rice,wheat and corn,respectively,for empirical analysis.Firstly,through descriptive statistics,the link between the price trends of spot and futures of the three agricultural products is analyzed,then ADF unit root test is used to test the smoothness of the data series of spot and futures,cointegration test is conducted for the variables in which have the same order and non-smooth series,and then Granger causality test is used to determine the variable order,and finally,impulse response analysis and variance decomposition analysis are used to analyze the degree of interaction between spot price changes and futures price changes.The conclusions drawn from the empirical analysis include:theoverall fluctuations of agricultural spot and futures prices are stable,but the magnitude of fluctuations is different;the futures market has a certain price discovery function;the price discovery function of the futures market is different for different types of agricultural products.Finally,the article proposes to improve the investor structure of agricultural futures market,strengthen the supervision of agricultural futures market,establish and improve the linkage mechanism of "insurance + futures" model,improve the transmission efficiency of agricultural futures market and spot market,and actively introduce agricultural options market.The recommendations include improving the investor structure of the agricultural futures market,establishing and improving the linkage mechanism of the "insurance + futures" model,improving the transmission efficiency between the agricultural futures market and the spot market,and actively introducing the agricultural options market.