An Empirical Analysis Of Herding Effect In China’s Agricultural Product Futures Market

With the continuous development of modern economy and the continuous improvement of people’s material and cultural needs,behavioral economics has entered the vision of scholars because of its comprehensiveness and intersection.As an important theory in behavioral economics,"herd effect" is also attracting more and more attention."Herd effect" is generally understood as a kind of blindly following the trend,but its manifestations and causes are different in different fields.The futures market plays an important role in the whole financial market because of its basic functions such as price discovery and hedging.However,compared with foreign countries,China’s futures market started late and developed slowly.Its basic functions are not perfect in some aspects,and its instability is more prominent than foreign countries.The existence of "herd effect" will aggravate the instability of China’s futures market and affect the smooth operation of China’s futures market.China is a large agricultural country,and food security has been attached great importance as a key part of national work.At the same time,the price discovery function of the futures market determines that the smooth operation of China’s grain futures market directly affects the grain spot market.Therefore,ensuring the smooth operation and continuous development of the grain futures market plays an important role in China’s economic development.Then,what is the current situation of China’s grain futures market? Is there a "herd effect" ? What impact will its "herd effect" bring to the grain futures market? How to take measures to ensure the smooth operation of the grain futures market? These are all questions that need to be explored.Based on this,this paper selects three important grain crops in China-corn,wheat and soybean as the research object,uses the daily futures price data of three grain crops from January 5,2006 to December 31,2022,and on the basis of sorting and summarizing the existing literature,uses the more mature CSAD(Cross sectional Earnings Standard Deviation)model and the more advanced GARCH model to conduct empirical analysis on the selected data,Based on this,we can judge whether there is "herd effect" in China’s grain futures market,taking corn,wheat and soybean as examples.At the same time,according to the final conclusions obtained from the empirical analysis,from the perspective of different market subjects,the corresponding countermeasures and suggestions are put forward for the smooth operation of China’s grain futures market.Through empirical analysis,this paper obtains the following empirical results: First,three groups of time series data composed of the average value of the three futures data of corn,wheat and soybean show the characteristics of right deviation and peak.On the whole,there are few extreme values on both sides of the data,which is an ideal distribution state.Second,the three groups of time series data used in this paper do not have "pseudo regression" phenomenon,and the empirical analysis results using these data are reliable.Thirdly,by establishing the CSAD model to regress the serial data,we can see that the t statistic in the regression results is significant,and the F statistic is also greater than the critical value,which indicates that the regression results are ideal.Fourthly,after the GARCH(1,1)model is adopted for correction,the ARCH effect of the data has been eliminated,and the resulting empirical results are valid.Therefore,this paper draws the final conclusion that there is a significant herd effect in China’s grain futures market from 2006 to 2022,taking corn,wheat and soybean futures as examples.On the basis of the research conclusion,this paper puts forward countermeasures and suggestions from the perspectives of the participants in the futures market,the futures market variety structure,and the futures market mechanism,which provides a reference basis for the operation of China’s grain futures market,the formulation of the government’s grain industry policy,and the further improvement of the futures trading system.