Empirical Research On Speculative Bubbles In Chinese Commodity Futures Market

Asset bubble has been the theory frontier of the economists, which is also a focus of daily attention. Assets refer to asset price bubble that cannot be explained by fundamental factors such as cash flow and discount rate, etc. The asset bubbles have great impact on the real economic. It is generally thought that the bubble research involves the rational bubbles research, which has the systematic and scientific rationale, and can explain the formation mechanism of asset bubble well. So the rational bubbles occupy the dominant position in the bubble research.Based on the common theoretical model of rational bubbles, we apply the McQueen and Thorley (1994) duration dependence test, an approach that previously has successfully identified rational speculative bubbles in the equity, currency and real estate markets, on the interest-adjusted basis. The interest-adjusted basis captures speculative bubbles in commodities. To estimate the interest-adjusted basis, we first match contiguous physical spot prices for each of the 11commodities with a maturity invariant index of financial futures time series, and then adjust for the risk-free rate. We then subject the interest-adjusted basis to the duration dependence test to assess the likelihood of duration dependence.The study offers three main contributions to literature. First, the study expands the literature of rational speculative bubbles to most of all commodities markets in domestic. The study expands the literature on speculative behavior in commodities. In domestic, only Ban (2009) studies the gold future market also Wang and An (2010) study speculation bubbles in the wheat market. While in foreign country, only few published studies test for the possible presence of rational bubbles in any commodity, Moreover, our data covers a wide range of different commodities. Since most studies focus on a homogenous subset of commodities, only few studies have investigated a wider range of heterogeneous subset of commodities. Second, it addresses some methodological shortcomings in empirical tests previously used to detect speculative behavior in foreign financial markets.The phenomenon of rational bubbles causes serious harm to the China commodity futures market, which must be efficiently regulated. So to eliminate the phenomenon of rational bubbles and make our commodity futures market grow healthy and steady, the perfect institution and diversity financial markets is to build.