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Is Futurization the Culprit for the Violent Fluctuation in China’s Apple Spot Price?

Author

Listed:
  • Lin Xie

    (National School of Agricultural Institution and Development, South China Agricultural University, Guangzhou 510642, China)

  • Jiahua Liao

    (College of Economics and Management, South China Agricultural University, Guangzhou 510642, China)

  • Haiting Chen

    (College of Economics and Management, South China Agricultural University, Guangzhou 510642, China)

  • Xuefei Yan

    (College of Economics and Management, South China Agricultural University, Guangzhou 510642, China)

  • Xinyan Hu

    (National School of Agricultural Institution and Development, South China Agricultural University, Guangzhou 510642, China)

Abstract

China aims to utilize the futures market to stabilize agricultural product price fluctuation by quantifying the effects of risk transfer and price discovery. However, the role of futurization has been questioned and even posited as the cause of drastic fluctuations in spot market prices. This research aims to clarify the impact of futurization on the price fluctuation of agricultural products and to provide policy reference for the development of the agricultural futures market through the research. Here, we examine the spot price data for apples and use Interrupted time-series analysis (ITSA) and GARCH models to estimate the impact of apple futures on the volatility of spot prices. Our findings demonstrate that the launch of China’s apple futures did not increase the volatility of apple spot prices; that is, futurization was not the cause of skyrocketing apple spot prices. In the long term, our results suggest that futures will help reduce the volatility of apple spot prices and that the introduction of futures will ultimately reduce the price volatility of agricultural products.

Suggested Citation

  • Lin Xie & Jiahua Liao & Haiting Chen & Xuefei Yan & Xinyan Hu, 2021. "Is Futurization the Culprit for the Violent Fluctuation in China’s Apple Spot Price?," Agriculture, MDPI, vol. 11(4), pages 1-14, April.
    • Handle: RePEc:gam:jagris:v:11:y:2021:i:4:p:342-:d:534240
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    References listed on IDEAS

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    1. Giuseppe Timpanaro, 2023. "Agricultural Food Marketing, Economics and Policies," Agriculture, MDPI, vol. 13(4), pages 1-9, March.

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