Influence Mechanism Of Price Support Policy Reform On The Price Discovery Function Of Soybean Futures Market

In order to promote the marketization of soybean price formation,China carried out the reform of soybean price support policy in 2014 and 2017,which had a huge impact on the spot market.There is a close relationship between the futures market and the spot market.It is worth pondering whether the impact of reform will spread to the futures market.However,the existing literature pays more attention to the evaluation of the impact of policy reform on the spot market,and less on the futures market.Therefore,this paper studies the impact of soybean price support policy reform on the price discovery function of futures market and the underlying mechanism,so as to supplement the relevant research.The two reforms of soybean price support policy gradually weaken the government intervention,promote the dynamic renewal of long-term equilibrium of the market,lead to changes in the price fluctuation of spot and futures markets,and may further cause hedgers and speculators to adjust their participation in futures market.Specifically,the spot price fluctuation caused by policy reform will affect the hedging tendency of soybean operators,and futures price fluctuation will affect the speculative profit tendency of speculators.Given investor participation is the basic force to form the market price,the reform of soybean price support policy will change the investor participation behavior by influencing the price fluctuation,and ultimately affect the price discovery function of futures market.Based on the above analysis,this paper selects the soybean futures price time series and multi-regional spot price panel data from 2008 to 2019,uses Component Share Model,Information Share Model and Information Leadership Shares Model to measure the contribution of price discovery in futures market,obtains continuous time-varying price discovery variables through rolling window,and constructs a Difference-inDifference model to study the impact of soybean price support policy reform on the futures market The impact of futures market price discovery function.On this basis,this paper further verify the mechanism that policy reform affects investors’ participation by changing the market price fluctuation,thus affecting the price discovery function of futures market.Firstly,this paper examines the impact of the reform of soybean price support policy on the price fluctuation of spot and futures markets,then tests the impact of the price fluctuation of spot and futures markets on the participation of hedgers and speculators respectively,and finally examines the impact of the participation of two types of investors on the price discovery function of soybean futures market.The results show that: firstly,the reform of Target Price Subsidy Policy increased the ability of futures market to reflect non-noise new information by 2.42% in 2014,while the reform of Producer Price Subsidy Policy reduced the ability by 3.05% in2017.That is to say,the two reforms strengthened the price discovery function of futures market first and then weakened it;secondly,the reform of Target Price Subsidy Policy significantly increased the price fluctuation of spot and futures,while the Producer Subsidy Policy reduced the price fluctuation of futures market,and had a negative impact on the spot market.thirdly,the spot price fluctuation promotes the participation of hedgers,while the futures price fluctuation promotes the speculators;fourthly,both hedger and speculator participation can enhance futures market price discovery.The conclusion of this paper confirms the impact of agricultural spot market policy on futures market,and suggests the policy makers to consider the function of futures market in the process of making spot policy,to allow appropriate price fluctuations,and to encourage investors to participate actively.