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Trading activity and price behavior in Chinese agricultural futures markets

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  • Wang, Xiaolin
  • Ye, Qiang
  • Zhao, Feng

Abstract

Using a comprehensive sample of China's agricultural futures from 2010 to 2015, we investigate the relation between trading activities and futures markets liquidity, returns and volatilities. We find that contemporaneous order imbalances are positively related to returns. Order imbalance caused by price pressure lasts more than one day indicating difficulty in absorbing excess buy and sell orders. We also find that lagged order imbalance can predict current returns and that the effect of order imbalance on liquidity is limited. These results are consistent with the explanation that speculative trading not liquidity hinders the Chinese agricultural futures markets to accommodate excess order imbalance.

Suggested Citation

  • Wang, Xiaolin & Ye, Qiang & Zhao, Feng, 2016. "Trading activity and price behavior in Chinese agricultural futures markets," Finance Research Letters, Elsevier, vol. 18(C), pages 52-59.
    • Handle: RePEc:eee:finlet:v:18:y:2016:i:c:p:52-59
    DOI: 10.1016/j.frl.2016.03.028
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    Cited by:

    1. Kou, Yi & Ye, Qiang & Zhao, Feng & Wang, Xiaolin, 2018. "Effects of investor attention on commodity futures markets," Finance Research Letters, Elsevier, vol. 25(C), pages 190-195.
    2. Nan, Qiuying & Sun, Mengchan & Nie, Jiajia & Yang, Rui & Wan, Lijuan, 2023. "The efficacy of a forward market for the agricultural sector in mitigating climate risk: A potential alternative to agricultural subsidies?," Finance Research Letters, Elsevier, vol. 55(PB).
    3. Muzhao Jin & Fearghal Kearney & Youwei Li & Yung Chiang Yang, 2023. "Order book price impact in the Chinese soybean futures market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 606-625, January.
    4. Zhou, Liyun & Zhang, Rixin & Huang, Jialiang, 2019. "Investor trading behavior on agricultural future prices," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 365-379.
    5. Martin T. Bohl & Pierre L. Siklos & Claudia Wellenreuther, 2018. "Speculative activity and returns volatility of Chinese major agricultural commodity futures," CAMA Working Papers 2018-06, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    6. Bohl, Martin T. & Siklos, Pierre L. & Wellenreuther, Claudia, 2018. "Speculative activity and returns volatility of Chinese agricultural commodity futures," Journal of Asian Economics, Elsevier, vol. 54(C), pages 69-91.

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