Dynamic price discovery in Chinese agricultural futures markets

Miao Li and Tao Xiong

Journal of Asian Economics, 2021, vol. 76, issue C

Abstract: Research has not fully explored how Chinese agricultural futures markets perform their price discovery function over time. Our paper examines the role of Chinese agricultural futures markets in the price discovery process based on three well-established measurements of average price discovery contribution, and more importantly, the dynamic price discovery measurement. Using daily futures and spot prices from fourteen agricultural commodities, we find eleven contracts are efficient in price discovery. Besides, market-oriented changes in policies strengthen the price discovery performance of most futures markets, except for commodities that rely heavily on imports from other countries. Our results also suggest that trading activity is particularly important in determining whether thinly traded contracts are efficient in price discovery. Our paper provides a comprehensive judgment involving both average and dynamic price discovery contribution measurements on assessing the efficiency of Chinese agricultural futures markets. Our results might also serve as a reminder that market-oriented reforms in the spot markets of commodities might be useful to intensify the pricing power of the futures markets.

Keywords: Price discovery; Chinese agricultural markets; Time-varying vector error correction model; Futures markets (search for similar items in EconPapers)
JEL-codes: G13 G14 Q10 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:76:y:2021:i:c:s1049007821000993

DOI: 10.1016/j.asieco.2021.101370

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