The Research on the Information Spillover Effects between China's Agricultural Futures Market and Spot Market: Take the Corn Futures for Example

Abstract

According to the views of the Theory of Market Microstructure, the information between different markets will spillover each other and thereby influences another market price. This paper using Johansen co-integration theory, Granger causality test and lead-lag model investigated the information spillover effects between Dalian Commodity Exchange corn futures prices and corn spot prices and analyzed the two market information spillover effects from the point of transaction cost. The empirical results show that there are information spillover effects between the futures market and spot market. Two market price series has a long-term equilibrium and the futures prices are the spot prices Granger reasons and the futures prices lead the spot prices. The information spillover effects of the futures market are the specific performance of price discovery function of futures markets. China's futures market has price discovery function. But at the same time we should also be aware that trade practices control can control risk, but also affect the reaction of futures prices to the market's information. China's futures market should strengthen the system innovation and use market means substitute for the administrative measures to control risk and establish an effective futures market.