Abstract
Futures markets are fundamentally driven by price discovery. China has the highest cotton output and consumption, so enhancing the cotton futures price discovery function promotes the sustainable and healthy growth of China's cotton sector. We used cotton futures and spot prices from 2018 to 2022 as research samples to examine the changes in cotton futures price discovery efficiency amid the Sino-US trade war and the appearance of Covid-19. Using the IS model, we observed that: (1) the cotton futures market always holds a dominating position in price discovery throughout 2018-2022, and (2) the impact of Covid-19 significantly lowered the price discovery function of the cotton futures market, which shows that: (1) the Chinese cotton futures market is not yet able to endure the impact of unexpected and large-scale health events such as Covid-19; and (2) when emergencies arise, we should respond expeditiously in order to reestablish market stability.
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