Study On The Spillover Effect Between International And Domestic Natural Rubber Futures Market

Natural rubber is one of the national important strategic materials and its price fluctuations will affect the development of the world's rubber and related industries.However,on the current situation in domestic,natural rubber's price fluctuates frequently and remains in the doldrums in recent years,which leads to a lot of problems,for example,the rubber farmers' income cannot be guaranteed,the loss of labor in the industry is serious and so on.Natural rubber industry is facing unprecedented challenges,which have hindered the long-term,stable development of domestic natural rubber enterprises.In this context,researching on the relationship of price volatility between natural rubber markets at home and abroad,figuring out the impact of price fluctuations from international market to domestic market and exploring the development Outlet of domestic natural rubber enterprises have become the focus of attention of academic circles.Price volatility means that commodity price fluctuations around the value.On the one hand,it reflects the price changes at some point in time,such as the rise or fall;on the other hand,it reflects the degree of fluctuation in the price of a certain period,such as increased or slowed.Typically,spillover effect means when an organization is carrying out an activity,it will produce the desired effect activities,and also have an impact on a person or the society outside of the organization.In which the mean spillover effect depicts the relationship between price transmission in different markets,or we can say it means the conduction direction and magnitude of price changes;while the volatilityspillover effect depicts the risk transfer relation between different markets,and we can consider that it means the degree of price volatility conduction.This paper will establish a VAR-BEKK-GARCH(1,1)model to study the spillover effect of price volatility between the two futures markets based on the daily settlement price from January 4,2011 to December 16,2015,explore the price volatility relationship between international natural rubber and domestic natural rubber,learn the conductive path and direction of fluctuation risks in the markets,And propose appropriate policy recommendations based on the findings.The first part is an introduction,mainly introduces the research background and significance,it gives a brief description about the research ideas,frameworks and innovation of this paper.The second part is a review study of literature,mainly introduces and comments the achievement of domestic and foreign scholars on the natural rubber price fluctuations,as well as the relationship of price fluctuations between different natural rubber markets and spillover effects.The third chapter is correlation theory and models,the theoretical part describes the characteristics of financial time series and the spillover effects meaning,while the model part introduces the relevant principles of VAR model and multivariate GARCH model.The fourth chapter is related instructions of data's selection and pre-processing,it also analyzes the mean spillover effects between natural rubber futures market at home and abroad.The fifth part has studied the volatility spillover effect between the two major markets through the BEKK-GARCH model and finished a reasonable test of model results by using Wald statistic and ARCH-LM statistic.The sixth chapter is the conclusions,policy recommendations and future research prospects.In this paper,we draw the following two conclusions:Conclusion 1,international natural rubber futures market has a potential price discovery effect for domestic natural rubber futures market,the prices of international natural rubber futures market up or down will cause domestic natural rubber futures market' prices up or down.Conclusion 2,international natural rubber futures market is still in a dominant position on the pricing of natural rubber,while domestic natural rubber futures market appears passive.Conclusion 3,Stability of international natural rubber futures market determines the stability of domestic natural rubber futures market within a large extent.At the same time,domestic natural rubber futures market has a reverse regulation on the stability of the international natural rubber futures market to a less extent.This study can provide a theoretical support for China's natural rubber businesses and other stakeholders to analyze the future prices of domestic natural rubber,adjust the investment strategy and avoid risk.It can provide recommendations for the improvement of China's natural rubber price risk control mechanism,help the government to formulate policy about the natural rubber prices and promote China's natural rubber futures market development and improvement.The study has two shortcomings:firstly,the factors we considered which will cause price volatility in domestic natural rubber market are not comprehensive;secondly,the data processing method we used may not reasonable.