Pricing Deviation In Corn Futures Market

China produces and consumes a huge number of corns every year, whose output accounts for about 1/5 of world corn, and consumption accounts for about 1/4. However, there is always a lack of authoritative and uniform price to guide the activities in our corn market. At the same time various traders lack effective risk-control tools when facing price fluctuation in the market. As the grain circulation reform advances gradually and the price risk has rise rapidly after China's entry into WTO, corn producers and processors'demands of risk control become stronger and stronger. Finally, corn futures came into the market successfully in September, 2004. And now, corn futures market has made great contribution to corn planting structure adjustment, connecting producing and selling regions, improving the competitive power of corn processing enterprises and China's pricing power in international corn market.To insure the exertion of function and robust development of corn futures market, this paper bases on behavioral finance theory, researches on traders'behaviors in corn futures market, then analyzes validity of the price of China corn futures. Combining this research conclusion with the empirical analysis of correlations of corn futures price and spot price this paper analyzes pricing condition in corn futures market.The main research work and conclusions are as follows:(1) This paper has reviewed all the domestic and foreign scholars'research findings on pricing in futures market, pointing out that using behavioral finance to study the pricing problem of China corn futures market has academic originality and practical value.(2) Point out that the risk avoidance function of corn futures market has developed well through collecting data of dealing and the traders'attitude towards corn futures market. Conclude that corn futures price is the dominant factor in the forming process of corn spot price by analyzing corn futures and spot price with correlation-analysis method and Granger test. Base on these works, this paper sums up the importance of corn futures price in Chinese economy and society.(3) Summarize the primary views of behavioral finance and the difference between behavioral finance and traditional finance. Then use the basic theory of behavioral finance to analyze the formation and change of corn futures price.(4) Trough establishing regression equations with corn futures price, historical return, and rate of trading volume change, this paper makes empirical analysis of traders'behaviors in Chinese corn futures market. The analysis results show that our corn futures traders have anchoring and framing bias.(5) Combining research conclusions of price discovery function of Chinese corn futures market with the empirical analysis of traders'cognitive bias, this paper concludes that there is pricing deviation in our corns market, which is caused by traders'cognitive bias in corn futures market, and then gives some suggestions about how to correct and reduce such pricing deviation.