Research On The Evaluation Of Information And Functional Effectiveness Of China’s Hog Futures Market

As the core industry of China’s livestock industry,hog industry is not only closely related to farmers’ income,but also drives the development of related industries and occupies an important position in the national economy.However,the hog industry is weak in risk resistance,and in recent years,along with the impact of various types of risk,it is plagued by the "hog cycle",so the suppression of hog prices has become one of the important objectives of the government’s macro-control policy.In order to achieve this goal,hog futures were born,which were officially listed on January 8,2021,and are the first futures variety for live delivery in China.After two years of normal operation,whether the hog futures market can alleviate the operational risks caused by frequent fluctuations of hog spot prices has become the core topic of academic discussion.Based on information efficient market theory,futures price discovery theory and futures hedging theory,this study divides the futures market effectiveness into two dimensions:information effectiveness and functional effectiveness,and conducts a comprehensive analysis of the effectiveness of China’s hog futures market from these two dimensions respectively.Specifically,based on the daily data of hog futures prices and spot prices in China from January 8,2021 to January 31,2023,with reference to previous studies,this study uses the tour test,autocorrelation test,and variance ratio test to explore the market information validity,and uses VAR model,Granger causality test,impulse response function,and variance decomposition to explore the functional validity of price discovery by various methods,and finally uses Finally,the OLS model and ECM model are used to calculate the hedging ratio of hog futures,and then the effectiveness of the hedging function is explored.The study shows that the results of the tour test,autocorrelation test and variance ratio test are inconsistent in terms of market information validity,and the hog futures market is considered to be between weak and non-weak validity,and the historical information is not fully reflected in the price fluctuations.In terms of the effectiveness of the hedging function,the hedging rate of the pig futures market under the OLS model and the ECM model are 0.307 and 0.292 respectively,i.e.a unit of pig spot position requires 0.292 or 0.307 units of pig futures position to achieve the goal of risk hedging.Meanwhile,under the risk minimization constraint,the proportion of risk that can be reduced by these two types of hedging rate is9.327% and 9.304% respectively,neither of which reaches 10%,which means that although China’s hog futures market shows certain hedging function,the function is actually not strong.Overall,China’s hog futures market has initially possessed a certain market effectiveness,but there is still more room for improvement.Finally,based on the above findings,the future should accelerate the role of hog futures market from the following aspects:(1)Promote the listing of hog options.(2)Strengthening the promotion and guidance of futures trading.(3)Improve the supervision and management system of futures market.(4)Promote and improve the "insurance + futures" model.