Effects Of Futures Positions On Asset Prices

Futures prices have always being considered as the guide to future asset prices and theeconomy. Macroeconomists use commodity futures prices and spot prices to predictinflation rate. International monetary economists use the forward discount rate or the spotfutures price ratio to predict exchange rates in currency market. Financial scholars usethe futures market to predict the bond prices or stock prices. However, Harrison Hongand Motohiro Yogo found a new breakthrough, in their study published on "Journal ofFinancial Economics” in2012, they found that, when the futures market hedge demandand risk absorption capacity is limited, hold position volume is more effective inforecasting than futures prices. In this paper, we studied their model, and use it in China’sfutures market to test the prediction ability of holding positions.In this paper, we obtained the commodity futures with complete data in February2011toFebruary2014, we also studied stock index futures during the period of May2010toFebruary2014, we selected stock returns and return of commodity futures as asset prices,then we selected short-term interest rates, yield spreads, the change rate of M2, futurespositions, the rate of change rate of return, the basis and market imbalance indicators asinfluence factors, we did the empirical study separately on commodity futures and stockindex futures, to investigate the effects of holding positions on asset prices. The researchfound that, for commodity futures, change of holding positions and asset prices have highcorrelation, for stock index futures, M2changes have more significant influence on thestock price. This paper puts forward new ideas on prediction of asset prices, andempirical tested the new viewpoint, which has a certain reference value for finding theoptimized method in assets price forecasting.