The Empirical Research On The Relationship Between China's Agricultural Futures Prices And Spot Prices

In recent years,frequent price fluctuations of agricultural products,not only increased the earnings risk of farmers and dampened farmers' enthusiasm for production,also caused confusion in the market and influenced the daily lives of consumers.Agricultural futures as one of the financial derivatives to set up should play its function of discovering price and stabilizing fluctuations,and then help the healthy and stable development of China's agricultural markets.The purpose of the paper is to find the relationship between futures prices and spot prices through empirical analysis in the egg futures,and then offer an objective evaluation of operating results in our egg futures,including price finding and stabilizing volatility.It can help to enrich futures category,push out new futures products,provide theoretical support for government decision-making,ensure stability of prices of agricultural products,promote agricultural industrialization and modernization.Prior empirical analysis,the theoretical basis of the relationship between futures and spot prices were statemented,including the formation of futures and spot price,relation and difference between them,as well as the meaning of price finding and stabilizing fluctuating.It requires five conditions to let the functioning of futures markets work:a large number of participants in futures trading;centralized public auction;an appropriate proportion of hedgers and speculators on the market;scientific and effective risk management of the futures market;the spot price does not be intervened by administrative power and fluctuate frequently.In the part of empirical analysis,the relationship between the egg futures price and the spot price was divided into two parts.First,analyze the price finding of egg futures.It refers to many methods and models,for example,cointegration,error correction model,Granger causality test,impulse response and variance decomposition.The results show that the presence of cointegration relationship between egg futures and spot prices,in other words exists long-term stable equilibrium relationship;exist causal relationship between the futures price and the spot price of eggs in the presence of 5%significance level.In contrast,the impact of egg futures prices on the spot price volatility to be larger,that is egg futures has a stronger role in guiding price;in the short term,the deviation of egg futures prices and spot prices has a significant impact on the spot price,while Futuresprices have little effect.When futures prices and spot prices have a greater deviation the error correction term will help the spot price to get to the long-term equilibrium position.Then,analyze whether the egg futures prices stabilize the volatility of spot prices.Analysis of the idea is:firstly,consider the condition of people who never directly involved in futures trading.Try to build GARCH model,which includes the dummy variable "whether the egg futures launches".We can examine whether the existence of futures market slowed fluctuations of the spot price by the value and significance level of the coefficient of dummy variable.Secondly,consider the condition of people who directly involved in futures trading to slow fluctuation of the spot price.The results are as follows:on the one hand,investigate whether the presence of the futures market has played a role in stabilizing the spot price fluctuations,the result is positive.But from the value of the coefficient of dummy variable,the effect of stabilizing fluctuations is not very well;on the other hand,consider the sale of futures contracts in the futures market hedging,the risk of earnings can reduce 2.0189%at ECM-GARCH model.This paper not only analyzes the price finding of egg futures,but also analyzes whether the egg futures prices stabilize the volatility of spot price from a different perspective.This is an innovation point of the paper,which is different from other literatures.Next,analyze the reasons of the impact of China's agricultural futures market.From the point of view of the spot market,the reasons are as follows:farmers involved in agricultural futures market to be inadequate;farmers does not fully share the benefits of agricultural futures markets;futures institutions does not provide sufficient service;inappropriate intervention and controls of price by government.From the perspective of the futures market,the reasons are as follows:insufficient agricultural futures products;the organizational form of futures exchange falls behind.Finally,put forward some suggestions to improve the operational mechanism of the futures market of agricultural products.The suggestions are as follows:governments and regulators should accelerate agricultural options to be listed;increase farmers' training;develop intermediary organizations;improve the structure of varieties of agricultural futures;establish a sound legal system of futures markets;strengthen on the spot market consolidation and improvement.The possibility of farmers directly involved in the futures market is very small.So they can work with new agricultural business entities,such as cooperatives and leading enterprises to indirectly involved in the futures market.Dealer should improve the level of related knowledge and the effectiveness of hedging and other operations.Agricultural futures companies should improve the ability of market research and judgment,so as to provide better service and investment advice for customers.