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A Research of the Interaction and Price Fluctuation Relationship between Chinese Sugar Futures and Spot Market

Wen‐Si Xie, Lingyun He, Yi An

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Abstract

Based on co-integration theory,through co-integration analysis,Granger causality test,establishing VEC model,impulse response function and variance decomposition,an empirical analysis on the enter-relationship and fluctuation transmission mechanism of the sugar futures market and the spot market was conducted.It was found a long-term equilibrium relationship as well as a mutual Granger causality between the future and spot price,which reflected the stable enter-relationship between sugar futures and spot market.Furthermore,futures market is in the lead in price discovery mechanism.

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What this paper is about

Based on co-integration theory,through co-integration analysis,Granger causality test,establishing VEC model,impulse response function and variance decomposition,an empirical analysis on the enter-relationship and fluctuation transmission mechanism of the sugar futures market and the spot market was conducted.It was found a long-term equilibrium relationship as well as a mutual Granger causality between the future and spot price,which reflected the stable enter-relationship between sugar futures and spot market.Furthermore,futures market is in the lead in price discovery mechanism.

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Available abstract

Based on co-integration theory,through co-integration analysis,Granger causality test,establishing VEC model,impulse response function and variance decomposition,an empirical analysis on the enter-relationship and fluctuation transmission mechanism of the sugar futures market and the spot market was conducted.It was found a long-term equilibrium relationship as well as a mutual Granger causality between the future and spot price,which reflected the stable enter-relationship between sugar futures and spot market.Furthermore,futures market is in the lead in price discovery mechanism.

Key concepts: Futures contract, Granger causality, Economics, Variance decomposition of forecast errors, Econometrics, Futures market, Impulse response, Price discovery

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