Title: The dynamic relationship between spot and futures prices of the soybean futures market in China

Authors: Yajie Wang, Xiaofeng Hui, Yan Liu

Addresses: School of Management, Harbin Institute of Technology, No. 13, Fuyuan Street, Nagang District, Harbin (150001), People's Republic of China. ' School of Management, Harbin Institute of Technology, No. 13, Fuyuan Street, Nagang District, Harbin (150001), People's Republic of China. ' School of Management, Harbin Institute of Technology, No. 13, Fuyuan Street, Nagang District, Harbin (150001), People's Republic of China

Abstract: In the agricultural futures markets of China, whether there is a correlation between the spot and futures prices has been a focus in recent years. Taking soybeans of the Dalian Commodity Exchange (DCE) as an example, this paper examines the dynamic relationship between the prices of spot and futures, and analyses quantitatively the magnitude of the role of this futures market in price discovery, using basis analysis, correlation analysis, the Granger causality test and Johnson co-integration test. The results of this research suggest that the spot and futures prices are co-integrated over the long term, and though they interact strongly, spot prices impact futures prices more heavily, showing unidirectional feedback.

Keywords: basis analysis; Granger causality test; correlation analysis; Johnson co-integration test; dynamic relationship; spot prices; futures prices; soybean futures; futures markets; China; agricultural futures; commodity exchanges.

DOI: 10.1504/IJNVO.2009.025934

International Journal of Networking and Virtual Organisations, 2009 Vol.6 No.4, pp.379 - 388

Published online: 25 May 2009 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article