Abstract
The presence of asymmetry in the distribution of financial returns is not only an important factor which should be considered in the process of optimal portfolio allocation, but also one of the variables having close relationship with the recognition and measurement of financial risk. This paper adopts a method based on bootstrap to measure asymmetry in the distribution of financial returns, as proposed by Lisi (2007). Results of asymmetry test on the distribution of four representative price index series coming from agricultural futures market in China are presented, and the four indexes are hard wheat index, cotton index, sugar index and soybean oil index. The results indicate that, except for the distribution of soybean oil index return which has an evident asymmetry characteristic, the other three ones all can be considered symmetric at a high confidence level. This paper contributes to asymmetry evaluation in the marginal distribution of financial returns, as well as the study of distribution characteristics in agricultural futures index returns of China, in the way of providing new empirical evidence.
Highlights
Agricultural futures market is an important part of modern financial system, whose functions of producing guiding, hedging, and market stabilization have gained wide attention from governments, enterprises and institutions, and it has been growing and developing since its emergence
The aim as well as innovation of this paper is to evaluate the presence of asymmetry in the distribution of Chinese agricultural futures return, by studying four representative price indexes in the market and by a test method based on bootstrap, so as to provide more accurately and reliably empirical evidence for the question that whether there is significant asymmetry existing in the return distribution of the financial market
Most of the asymmetry test methods adopted in the researches of return series in Chinese agricultural futures market are still the conventional skewness coefficient method
Summary
Agricultural futures market is an important part of modern financial system, whose functions of producing guiding, hedging, and market stabilization have gained wide attention from governments, enterprises and institutions, and it has been growing and developing since its emergence. It should be pointed out that, asymmetry test has been conducted in descriptive statistics part in many empirical research literatures studying the properties of price volatility in Chinese agricultural futures market, the test methods used in these papers are mostly confined to the conventional way, namely test based on coefficient of skewness (Tang Yanwei et al, 2005; Wang Jun & Zhang Zongcheng, 2006; Zhang Shuzhong et al, 2006; Shi Limin et al, 2009). Series are generally leptokurtic, fat tailed and skewed (Except return series of cotton index, the rest three ones’ skewness coefficient are significantly less than zero and excess kurtosis coefficient are significantly greater than zero); Thirdly, ADF test results in Table 1 show that the null hypotheses of a unit root in return series are all rejected significantly, the series are stationary and the further analysis and econometric modeling process are practicable; In the end, the Ljung-BoxQ statistics in Table 1 shows that, the null hypotheses of no autocorrelation in return series of hard wheat index and cotton index must be rejected in a long time range (10), while for sugar index and soybean oil index the same null hypothesis cannot be rejected
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