An empirical study on the regulated Chinese agricultural commodity futures market based on skew Ornstein-Uhlenbeck model

Yizhou Bai and Cheng Xue

Research in International Business and Finance, 2021, vol. 57, issue C

Abstract: This paper describes the regulated agricultural commodity futures market of China, focusing on six actively traded futures: corn, strong gluten wheat, No. 1 soybean, soymeal, cotton, and white sugar. A novel skew Ornstein-Uhlenbeck model is employed to characterize price dynamics with government controls. The empirical analysis reveals significant skew phenomena in these six futures and indicates that the price dynamics are influenced by state policy. The observed skew phenomena are most notable in grain futures, with relatively weaker, but statistically significant, evidence of skew phenomena in oilseed and soft futures markets. In addition, generalized quasi-likelihood ratio tests show that the skew Ornstein-Uhlenbeck model is superior to the Ornstein-Uhlenbeck model.

Keywords: Agricultural commodity futures; Skew Ornstein-Uhlenbeck processes (search for similar items in EconPapers)
JEL-codes: G13 G18 Q14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:57:y:2021:i:c:s027553192100026x

DOI: 10.1016/j.ribaf.2021.101405

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