Research On The Impact Of Investor Sentiment On The Price Discovery Function Of Corn Starch Futures Market

Bulk commodities have a large supply and demand,and their changes can have an impact on the national economy and people’s livelihood.Therefore,the state imposes a unified price limit on bulk commodities to maintain their price stability.As one of China’s bulk commodities,corn starch has a large output and a wide range of uses.It can be used not only as agricultural by-products and closely related to farmers’ income,but also as industrial basic raw materials to participate in industrial production.In order to stabilize the market price of corn starch and ensure the interests of industrial and agricultural entities,corn starch futures were launched in Dalian Commodity Exchange in December 2014.The normal functioning of the futures market is based on the effective market.The price discovery function of the futures market needs to be fully realized under the conditions of a rational market.The rational expectation of investors is one of the basic prerequisites for the realization of the price discovery function in the futures market,but the participants in the market are not completely rational,and they often have "emotions"."Emotion" affects investors’ subjective judgment of future earnings,and then their investment behavior,which will greatly affect the price discovery function of corn starch futures market.Therefore,this paper studies the impact of investor sentiment on the price discovery function of China’s corn starch futures market,in order to arouse people’s attention to the role of investor sentiment in the price discovery process of the futures market,and put forward policy suggestions for strengthening the price discovery function of corn starch futures.On the basis of previous research,this article first introduces the current development status of the corn starch market and analyzes the relationship between the futures and spot prices of corn starch.The results show that there is a strong correlation between the futures prices of corn starch and spot prices.Futures prices may have a certain guiding effect on spot prices,but the basis fluctuation is severe,and the price discovery function of the corn starch futures market may not be fully utilized,this laid the foundation for future research.Secondly,six indicators,namely,investor confidence index(SICI),turnover rate(RURN),corn starch futures’ AOID,corn starch futures’ AMP,corn starch futures’ volume(VOL)and corn starch futures’ position(OPI),are selected to construct a composite indicator of investor sentiment by using the PAC method after descriptive statistical analysis.Finally,this article conducted a two part empirical study using the VAR model to explore the impact of investor sentiment on the price discovery function of corn starch futures.One is to explore the impact of investor sentiment on corn starch futures and spot prices.The study found that:(1)corn starch futures prices can guide spot prices,but not vice versa,indicating that the price discovery function of the corn starch futures market has not been fully utilized,which is consistent with previous analysis results;(2)Investor sentiment hardly affects the spot price of corn starch,but it can affect futures prices,indicating that when investor sentiment fluctuates,it affects the price discovery function of corn starch futures by affecting the price of corn starch futures.The second is to use the basis as an indicator of the price discovery function of the corn starch futures market,and explore the impact of investor sentiment on the corn starch basis.The study found that:(1)investor sentiment fluctuations will cause the instability of the basis,which reflects that the price discovery function of the futures market has not been fully played,indicating that investor sentiment will inhibit the price discovery function of the corn starch futures;(2)The basis can affect investor sentiment,but the impact is lower than the impact of investor sentiment on the basis,indicating that the price discovery function of corn starch futures can also affect investor sentiment to a certain extent.After the empirical analysis,this paper puts forward suggestions on improving the trading level of investors,giving full play to the professional advantages of futures operating institutions and the regulatory role of regulatory authorities,hoping to provide useful ideas for the healthy development of China’s corn starch futures market.