Determinants of the volatility of futures markets price returns: The case of Chinese wheat futures

Abstract

This paper establishes the test models of individual effect and joint effect of the futures price volatility determinants on the basis of GARCH(1,1) model, and takes example for Wheat futures, and analyses empirically the relationship of futures price volatility and time to maturity, of futures price volatility and the day of week, of futures price volatility and volume and open interest. the study results indicate that the price volatility of Wheat futures doesnpsilat exist consistent maturity effect, and maturity effect explains very little of the volatility in futures prices. With respect to the day of week effect, the volatility of futures prices throughout the week is found to be different, the volatility of futures prices on Mondays is higher than the other days of the week, the volatility of futures prices on Friday is lower than the other days of the week, the day of week effect has a little explanation function of volatility. Consistent with the MDH, the results indicate a positive relationship between price volatility and volume, and a negative relationship between price volatility and open interest, and volume and open interest have a larger explanatory power of futures price volatility.