Trading activity and price behavior in Chinese agricultural futures markets

Xiaolin Wang, Qiang Ye and Feng Zhao

Finance Research Letters, 2016, vol. 18, issue C, 52-59

Abstract: Using a comprehensive sample of China's agricultural futures from 2010 to 2015, we investigate the relation between trading activities and futures markets liquidity, returns and volatilities. We find that contemporaneous order imbalances are positively related to returns. Order imbalance caused by price pressure lasts more than one day indicating difficulty in absorbing excess buy and sell orders. We also find that lagged order imbalance can predict current returns and that the effect of order imbalance on liquidity is limited. These results are consistent with the explanation that speculative trading not liquidity hinders the Chinese agricultural futures markets to accommodate excess order imbalance.

Keywords: Agricultural futures; Order imbalance; Market returns; Liquidity (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:18:y:2016:i:c:p:52-59

DOI: 10.1016/j.frl.2016.03.028

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