Study Of China's Oil Futures Market Efficiency

China is the world's leading countries in producing and consuming oil, and greatly depend on foreign markets, especially the external dependence of Vegetable oil market exceed more than 60%. Self-sufficiency rate of China's current oil is about 40%, generally when self-sufficiency rate reach 60%, we can think it is safe. China has put forward to return oil the self-sufficiency rate to 50% during 5 years. Since the year of 2003/2004, in terms of a single and imported country, China has become the world's superpower country who imports more vegetable oil than other countries, and the imported volume of Soy Oil,Palm Oil,Rapeseed Oil ranked the first in the world, account for 18% of total global trade. The global financial crisis which start from 2007 also Caused Substantially Change of the major domestic fuel oil price. If we do not have a mature and sound futures market, not have the right to speak in the international oil market, we will be unable to avoid Risk of price fluctuation. The efficiency of the futures market of a country is the main criteria to judge a country's level of development and maturity of futures market. Fundamental purpose of oil futures markets'Development and improve is to Improve the efficiency of futures markets and effectively operate in the futures market, to fully play the function of Price discovery and hedging, so finally form the futures market which have the right to price in international.Since the Evaluation of Futures market's efficiency involves a number of aspects, this article constructs the system of the oil futures market efficiency's evaluation based on the market theory of Effectiveness,Financial market Microstructure Theory,Behavioral Finance, we Evaluated the efficiency of China's oil futures market from Four aspects: Information Efficiency,operating efficiency,Functional efficiency,International pricing efficiency.Price's volatility bear the characteristics of the typical bull market, bear market and adjustment market since Chinese oil futures market come into being, this article divided the futures market into three stages, which includes the stage of Market prices'rising,Market prices'decline and Market price adjustments, to Study asymmetric characteristics of Chinese oil futures market efficiency. The main conclusions are as follows:1. Evaluation of Chinese oil futures market's information efficiency. As Information efficiency is the basis of market efficiency, this article tested Week Effect in the futures market using a mode of TARCH with dummy variables when we analyzed the information efficiency in the futures market. The results show that Week Effect exists in the Chinese oil futures market; there were the positive "Monday effect" or negative "Tuesday effect," or both exists during the different stages of price volatility, and Market do not meet the weak and valid conditions. China has the low efficient information oil futures market.2. Evaluation of Chinese oil futures market's operational efficiency. This paper research and evaluate the Chinese oil futures market's operational efficiency from the transaction's cost and liquidity. Based on the analysis of the dominant presence of transaction costs in Chinese oil futures market, we constructed the model of analyzing market's liquidity based on transaction cost by the Model of price shocks Through empirical analysis, we can draw such conclusion as below, the liquidity situation of the oil futures market in our country could be summarized as transaction frequency of the bear market is the highest, followed by adjusting market and the bull market is the lowest, however the variation of the unit business volume and the unit transaction frequency has triggered the huge price fluctuations in the bull market stage and the bear market stage, at the meantime the market transaction cost is relatively high, the fluctuation risk increases and the market fluidity is relatively poor. Comprehensively speaking, the market fluidity of the adjusting market stage is the best and the efficiency of liquidity is also the highest.3. Evaluation of Chinese oil futures market's function efficiency. In this paper, we verify the degree of implementation and efficiency of the Chinese oil futures market's price discovery and hedging functions. We Select recent front-month contract,Second Contract and Phase IV contract as study's object, and apply model of ARMA and ECM to evaluate efficiency of the Chinese oil futures market's price discovery separately in bear market, bull market and adjustment market. The empirical results show that Chinese oil futures market price discovery efficiency is different at different times, and futures market price discovery efficiency of different varieties are different. Palm oil futures prices are insufficient found in a bull market and bear market, and the efficient of the price discovery are efficient in Adjustment market in recent front-month contract; Soybean oil futures price discovery in the bull market are excessive, in recent front-month contract and the second contract are efficient in price's discovery In a bear market, the price's discovery are insufficient in Adjustment market; Rapeseed oil futures price's discovery are excessive in the bull market, In a bear market and adjustment market are insufficient.The study use the variable structure co-integration with a constant term, trend term and parameter term drift to correct the error of traditional hedging model, choose the main contract as the research object; calculate the dynamic optimal hedge ratio of soy oil, palm oil and rapeseed oil in Chinese oil futures market. The results show that the hedge efficiency of Chinese oil futures market is low. We can reduce the risk of spot market, but can't completely eliminate the risk and achieve perfect hedge in Chinese oil futures market. Compare with the dynamic optional hedge ratio of the three oil futures market, the hedge efficiency of palm oil futures market is high; the hedge efficiency of soy oil futures market is in middle, the hedge efficiency of rapeseed oil futures market is lowest.4. The evaluation of international pricing efficiency on Chinese oil futures market. The highest purpose of the development of Chinese oil futures market is a mature and perfect futures market that possesses the right of international pricing. Using SVAR model, the paper study the price transmission mechanism of national and international oil futures market, consider the spot effect and lag effect between the different market prices in price transmission. The exchange rate is as a external variable in the model. The empirical results show that the Chinese oil futures market doesn't have the right of international pricing on soy oil futures, rapeseed oil futures and palm oil futures; the efficiency of international pricing is low. CBOT and ICE is the pricing center of soy oil and rapeseed oil futures. BMD don't have the right of international pricing on palm oil futures. The influence of the appreciation of RMB exchange rate on national oil futures market is great, but the influence on international oil futures market is not significant.5. The suggestions of improving the efficiency of Chinese oil futures market. The overall efficiency of Chinese oil futures market is very low, and the development of market is immature. Compare with the mature international futures market, the paper give the targeted suggestions on fostering the market player of oil futures market, increasing the varieties of oil futures market, innovating the market trading system and trading rules of oil futures market, strengthening the regulation of oil futures market and so on. In terms of increasing the new varieties of oil futures, we probe the feasibility of the listing of peanut oil futures in China.