An Empirical Analysis Of Thermal Coal Futures Price Discovery And Corporate Hedging Research

The futures market is an important part of our economy, it is not only for investors to establish a clear investment channels, but also stabilize supporting role for the smooth development of China’s economy. Futures market has two functions: price discovery and hedging.Thermal coal as an important strategic material, it is closely linked with the country’s economic security. However, compared with China’s huge market, China’s thermal coal pricing is very weak. Listed thermal coal futures for China is helpful to improve the thermal coal pricing.But, how the thermal coal futures price discovery function performed, and how to use it to help companies avoid risks is an issue of concern by many scholars.Firstly, this paper make a theoretical study of price discovery function of futures markets,study the origins of the futures market, the development, function and role, analyzes the relationship between the spot price and the futures price, followed by further analysis of the impact of China’s thermal coal prices factor. Finally, select the futures closing price data since the September26to March20,2014Qinhuangdao5500thermal coal spot market. In the analysis,first test the correlation between two sets of data analysis, after found a high correlation coefficient of two sets of data, the unit root tests carried out. Under the premise to ensure smooth data this paper use Johansen cointegration test and Granger causality test to determine the thermal effect of the relationship between spot and futures.Finally, according to the variance decomposition to quantify the contribution of the two for each other.According to the research results,China’s thermal coal futures market has a price discovery function, there are some guiding on the spot market. Based on the results, this paper attempts to help the thermal coal-related companies use hedging to hedge business risks.