China's Soybean Futures Market, The Functional Efficiency Of Empirical Analysis

Nowadays, futures market has become an indispensable tool of market economy. Since the transformation from planned economy to market economy,China has made market economy the main means of resource allocation. As the major means of regulating spot market and mitigating risks, it appears of great necessity to establish futures market in China.Futures market of China has undergone a flexural route since its birth in 1990.Early blind development led to the succeeding depression and rectification. After entering the new century, as the speeding-up of marketization of our economic system, the opening policies of price has brought fiercer fluctuations in prices in almost every industry, the government and enterprises have an increasing demand to strengthen risk management and perfect the market system. Under this background, the important implication of futures market to national economy is reknown, futures market shows its role of guaranteeing economic safety and boosting economic development, it therefore has entered a new era and its running has shown qualitative change, presenting the characteristics of promotion in status, preliminary formation of legal framework, increase in varieties and enlargement in market scale.As the quick pace of China's economy in the new period, the futures market faces a good chance. The scale of commodity futures market is getting larger and larger, the varieties are also getting richer and richer. The launch of stock index futures perfects China's futures market, the function of price discovery is well performed. At present, the development of our futures market is on a turning spot, it will welcome a golden era.The soybean futures is an important part of agricultural futures and one of the main varieties in DCE, accounting some 20% of all the transaction amount. Since 1996, China has become a net-importer of soybean, the importer dependence has increased from 48.1% in 2000 to 78.7% in 2008.Foreign funds process soybeans throughout the globe, enabling them to enter the oil processing market efficiently and cheaply. They have dominant pricing rights in the world. How to get the pricing rights in the global competition is the grim task we now face. Nevertheless, it depends on the high function efficiency of market.This paper first analyses the function efficiency of price discovery. The result of the granger causality test indicates that the guidance of the price of the soybean futures to the soybean spot price is strong, and as time goes by, the function of price discovery is becoming stronger, while the spot price's guidance to the futures price is weak. The result of the cointegration test indicates that there is a balanced relation between the futures price and the spot price from the long run, the result of ECM indicates that the expire price of the soybean futures market is the unbiased estimation of the spot price in the delivery period. Therefore we can draw a conclusion that the efficiency of price discovery of soybean futures is relatively high. The above results indicate that the theoretical consensus that the agriculture futures prices have strong guidance to its spot prices is well-founded. The price discovery function of the agricultures market is presented in these years'soybean futures market.Second, it analyses the hedging efficiency of the soybean futures market. The OLS regression, B-VAR model and the ECM model are respectively used to analyze the optimal hedging ratio of the soybean futures market based on the minimum variance method and the hedging efficiency. The result of the empirical research indicates the spot price and futures price of the soybean futures market are highly relative, the Basis risk of hedge is small. However, the result of the hedging efficiency indicates that the hedging efficiency of our soybean futures market is low. Finally it points out that improving the law system of futures market, improving the soybean spot market system, encouraging the planting of soybean and optimizing the structure of investors should be the core of future policies.