Is Futurization the Culprit for the Violent Fluctuation in China’s Apple Spot Price?

Lin Xie, Jiahua Liao, Haiting Chen, Xuefei Yan and Xinyan Hu
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Lin Xie: National School of Agricultural Institution and Development, South China Agricultural University, Guangzhou 510642, China
Jiahua Liao: College of Economics and Management, South China Agricultural University, Guangzhou 510642, China
Haiting Chen: College of Economics and Management, South China Agricultural University, Guangzhou 510642, China
Xuefei Yan: College of Economics and Management, South China Agricultural University, Guangzhou 510642, China
Xinyan Hu: National School of Agricultural Institution and Development, South China Agricultural University, Guangzhou 510642, China

Agriculture, 2021, vol. 11, issue 4, 1-14

Abstract: China aims to utilize the futures market to stabilize agricultural product price fluctuation by quantifying the effects of risk transfer and price discovery. However, the role of futurization has been questioned and even posited as the cause of drastic fluctuations in spot market prices. This research aims to clarify the impact of futurization on the price fluctuation of agricultural products and to provide policy reference for the development of the agricultural futures market through the research. Here, we examine the spot price data for apples and use Interrupted time-series analysis (ITSA) and GARCH models to estimate the impact of apple futures on the volatility of spot prices. Our findings demonstrate that the launch of China’s apple futures did not increase the volatility of apple spot prices; that is, futurization was not the cause of skyrocketing apple spot prices. In the long term, our results suggest that futures will help reduce the volatility of apple spot prices and that the introduction of futures will ultimately reduce the price volatility of agricultural products.

Keywords: apple; futures; spot price volatility; agricultural products (search for similar items in EconPapers)
JEL-codes: Q1 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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