2008•Yunnan Daxue xuebao. Shehui kexue banRequires access

China's futures market and the function of price discovery

Jiang Wu

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Abstract

At first,according to the literature on the function of price discovery,futures prices are misunderstood by many scholars as unbiased estimates of future spot prices,while futures markets usually have been thought to bear the function of price discovery.Then,by analyzing the futures prices of investment assets and consumption assets respectively,futures prices are proved in theory that they are not unbiased estimates.Furthermore,the relationships between futures prices and spot prices are discussed.Finally,the function of price discovery is presented that it is of vital economic significance.

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What this paper is about

At first,according to the literature on the function of price discovery,futures prices are misunderstood by many scholars as unbiased estimates of future spot prices,while futures markets usually have been thought to bear the function of price discovery.Then,by analyzing the futures prices of investment assets and consumption assets respectively,futures prices are proved in theory that they are not unbiased estimates.Furthermore,the relationships between futures prices and spot prices are discussed.Finally,the function of price discovery is presented that it is of vital economic significance.

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Available abstract

At first,according to the literature on the function of price discovery,futures prices are misunderstood by many scholars as unbiased estimates of future spot prices,while futures markets usually have been thought to bear the function of price discovery.Then,by analyzing the futures prices of investment assets and consumption assets respectively,futures prices are proved in theory that they are not unbiased estimates.Furthermore,the relationships between futures prices and spot prices are discussed.Finally,the function of price discovery is presented that it is of vital economic significance.

Key concepts: Futures contract, Price discovery, Economics, Financial economics, Spot contract, Function (biology), Investment (military), Normal backwardation

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