IDEAS home Printed from https://ideas.repec.org/a/bla/ajarec/v69y2025i2p453-470.html

Do China's Agricultural Futures Overreact to U.S. Futures Markets Returns? Evidence From Soybean and Corn Futures

Author

Listed:
  • Tao Xiong
  • Wenshu Lv
  • Guangcheng Fang
  • Weiyi Xia

Abstract

This study investigates the characteristics of traders' overreaction behaviour in China's soybean and corn futures markets to the overnight performance of U.S. futures markets and examines the impacts of the night trading policy on such overreaction behaviour. Our results reveal that traders in China generally overreact to U.S. markets' performance, but the overreaction diminishes when traders have enough time to calm their emotions. We also find that the introduction of night trading implemented by China's futures exchanges significantly reduces daytime overreaction because the extension of trading hours ensures that unexpected information is promptly reflected during night trading sessions. The proposed trading strategy of exploiting the overreaction generates considerable profits. However, it has not worked since the introduction of night trading, which further confirms the policy effect of night trading. Our study provides valuable guidance for futures exchanges seeking to monitor overreaction behaviour and formulate policies to target such behaviour.

Suggested Citation

  • Tao Xiong & Wenshu Lv & Guangcheng Fang & Weiyi Xia, 2025. "Do China's Agricultural Futures Overreact to U.S. Futures Markets Returns? Evidence From Soybean and Corn Futures," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 69(2), pages 453-470, April.
    • Handle: RePEc:bla:ajarec:v:69:y:2025:i:2:p:453-470
    DOI: 10.1111/1467-8489.12616
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1467-8489.12616
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1467-8489.12616?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Chao Li & Dermot J. Hayes, 2017. "Price Discovery on the International Soybean Futures Markets: A Threshold Co‐Integration Approach," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 37(1), pages 52-70, January.
    2. Miwa, Kotaro, 2019. "Trading hours extension and intraday price behavior," International Review of Economics & Finance, Elsevier, vol. 64(C), pages 572-585.
    3. Isengildina-Massa, Olga & Cao, Xiang & Karali, Berna & Irwin, Scott H. & Adjemian, Michael & Johansson, Robert C., 2021. "When does USDA information have the most impact on crop and livestock markets?," Journal of Commodity Markets, Elsevier, vol. 22(C).
    4. repec:bla:jfinan:v:44:y:1989:i:5:p:1385-99 is not listed on IDEAS
    5. Manuel A. Hernandez & Raul Ibarra & Danilo R. Trupkin, 2014. "How far do shocks move across borders? Examining volatility transmission in major agricultural futures markets," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 41(2), pages 301-325.
    6. Fung, Alexander Kwok-Wah & Lam, Kin & Lam, Ka-Ming, 2010. "Do the prices of stock index futures in Asia overreact to U.S. market returns?," Journal of Empirical Finance, Elsevier, vol. 17(3), pages 428-440, June.
    7. Chi-Wei Su & Xu-Yu Cai & Ran Tao, 2020. "Can Stock Investor Sentiment Be Contagious in China?," Sustainability, MDPI, vol. 12(4), pages 1-16, February.
    8. Ki-Hong Choi & Seong-Min Yoon, 2020. "Investor Sentiment and Herding Behavior in the Korean Stock Market," IJFS, MDPI, vol. 8(2), pages 1-14, June.
    9. Chopra, Navin & Lakonishok, Josef & Ritter, Jay R., 1992. "Measuring abnormal performance : Do stocks overreact?," Journal of Financial Economics, Elsevier, vol. 31(2), pages 235-268, April.
    10. Choi, Darwin & Hui, Sam K., 2014. "The role of surprise: Understanding overreaction and underreaction to unanticipated events using in-play soccer betting market," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PB), pages 614-629.
    11. Gunaratne, P. S. M. & Yonesawa, Y., 1997. "Return reversals in the Tokyo Stock Exchange: A test of stock market overreaction," Japan and the World Economy, Elsevier, vol. 9(3), pages 363-384, August.
    12. Wen, Danyan & Wang, Yudong & Zhang, Yaojie, 2021. "Intraday return predictability in China’s crude oil futures market: New evidence from a unique trading mechanism," Economic Modelling, Elsevier, vol. 96(C), pages 209-219.
    13. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    14. Sandip Dutta & Subhash C Sharma, 2012. "Daytime vs. Overnight Trading in Equity Index Futures Markets," Accounting and Finance Research, Sciedu Press, vol. 1(2), pages 1-13, November.
    15. Borgards, Oliver & Czudaj, Robert L., 2020. "The prevalence of price overreactions in the cryptocurrency market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 65(C).
    16. Baytas, Ahmet & Cakici, Nusret, 1999. "Do markets overreact: International evidence," Journal of Banking & Finance, Elsevier, vol. 23(7), pages 1121-1144, July.
    17. David Hirshleifer, 2001. "Investor Psychology and Asset Pricing," Journal of Finance, American Finance Association, vol. 56(4), pages 1533-1597, August.
    18. Klein, Tony & Todorova, Neda, 2021. "Night trading with futures in China: The case of Aluminum and Copper," Resources Policy, Elsevier, vol. 73(C).
    19. Dao, Thong M. & McGroarty, Frank & Urquhart, Andrew, 2016. "A calendar effect: Weekend overreaction (and subsequent reversal) in spot FX rates," Journal of Multinational Financial Management, Elsevier, vol. 37, pages 158-167.
    20. Ray R. Sturm, 2014. "A Turning Point Method For Measuring Investor Sentiment," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 15(1), pages 30-42, January.
    21. Xuan Yao & Xiaofeng Hui & Kaican Kang, 2021. "Can night trading sessions improve forecasting performance of gold futures' volatility in China?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(5), pages 849-860, August.
    22. Li, Miao & Xiong, Tao, 2021. "Dynamic price discovery in Chinese agricultural futures markets," Journal of Asian Economics, Elsevier, vol. 76(C).
    23. Stephen J. Larson & Jeff Madura, 2003. "What Drives Stock Price Behavior Following Extreme One‐Day Returns," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 26(1), pages 113-127, March.
    24. Ying Jiang & Neil Kellard & Xiaoquan Liu, 2020. "Night trading and market quality: Evidence from Chinese and US precious metal futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(10), pages 1486-1507, October.
    25. Mun, Johnathan C. & Vasconcellos, Geraldo M. & Kish, Richard, 2000. "The Contrarian/Overreaction Hypothesis: An analysis of the US and Canadian stock markets," Global Finance Journal, Elsevier, vol. 11(1-2), pages 53-72.
    26. Zhepeng Hu & Mindy Mallory & Teresa Serra & Philip Garcia, 2020. "Measuring price discovery between nearby and deferred contracts in storable and nonstorable commodity futures markets," Agricultural Economics, International Association of Agricultural Economists, vol. 51(6), pages 825-840, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Borgards, Oliver & Czudaj, Robert L. & Hoang, Thi Hong Van, 2021. "Price overreactions in the commodity futures market: An intraday analysis of the Covid-19 pandemic impact," Resources Policy, Elsevier, vol. 71(C).
    2. Ma, Gaoping & Bouri, Elie & Xu, Yahua & Zhou, Z. Ivy, 2025. "The “night effect” of intraday trading: Evidence from Chinese gold and silver futures markets," Global Finance Journal, Elsevier, vol. 64(C).
    3. Zhepeng Hu & Mindy Mallory, 2025. "Overseas Impact of USDA Reports: Evidence From Chinese Soybean Complex Futures," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 45(11), pages 2109-2127, November.
    4. Weiyi Xia & Tao Xiong & Miao Li, 2024. "Can night trading reduce price volatility? Evidence from China's corn and corn starch futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(4), pages 585-604, April.
    5. Adam Zaremba & Jacob Koby Shemer, 2018. "Price-Based Investment Strategies," Springer Books, Springer, number 978-3-319-91530-2, January.
    6. Fayssal Jamhamed & Franck Martin & Fabien Rondeau & Josué Thélissaint & Stéphane Tufféry, 2024. "Regime-Specific Dynamics and Informational Efficiency in Cryptomarkets: Evidence from Gaussian Mixture Models," Economics Working Paper Archive (University of Rennes & University of Caen) 2024-13, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    7. Borgards, Oliver & Czudaj, Robert L., 2020. "The prevalence of price overreactions in the cryptocurrency market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 65(C).
    8. Daniel, Kent & Hirshleifer, David & Teoh, Siew Hong, 2002. "Investor psychology in capital markets: evidence and policy implications," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 139-209, January.
    9. Alves, Paulo & Carvalho, Luís, 2020. "Recent evidence on international stock market’s overreaction," The Journal of Economic Asymmetries, Elsevier, vol. 22(C).
    10. Christopher J. Neely & Paul A. Weller, 2011. "Technical analysis in the foreign exchange market," Working Papers 2011-001, Federal Reserve Bank of St. Louis.
    11. Dumitriu, Ramona & Stefanescu, Razvan & Nistor, Costel, 2012. "Reactions of the capital markets to the shocks before and during the global crisis," MPRA Paper 41540, University Library of Munich, Germany, revised 10 Jan 2012.
    12. Dimitris Kenourgios & Nikolaos Pavlidis, 2005. "Individual Analysts’ Earnings Forecasts: Evidence for Overreaction in the UK Stock Market," Finance 0512011, University Library of Munich, Germany.
    13. Supriya Maheshwari & Raj S. Dhankar, 2017. "Profitability of Volume-based Momentum and Contrarian Strategies in the Indian Stock Market," Global Business Review, International Management Institute, vol. 18(4), pages 974-992, August.
    14. Ramzi Boussaidi, 2017. "The winner-loser effect in the Tunisian stock market: A multidimensional risk-based explanation," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 17(3), pages 178-189, September.
    15. Yamamoto, Shuhei & Janzen, Joseph P. & Serra, Teresa, 2024. "Autopsy of a futures market failure: Japan’s Dojima rice futures in the early 21st century," Food Policy, Elsevier, vol. 128(C).
    16. Muhammad Kashif & Sanyah Saad & Imran Umer Chhapra & Farhan Ahmed, 2018. "An Empirical Evidence of Over Reaction Hypothesis on Karachi Stock Exchange (KSE)," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(4), pages 449-465, April.
    17. Hisham Farag, 2015. "Long-term Overreaction, Regulatory Policies and Stock Market Anomalies: Evidence from Egypt," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 14(2), pages 112-139, August.
    18. Eero Pätäri & Timo Leivo, 2017. "A Closer Look At Value Premium: Literature Review And Synthesis," Journal of Economic Surveys, Wiley Blackwell, vol. 31(1), pages 79-168, February.
    19. John H. Cochrane, 1999. "New facts in finance," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 23(Q III), pages 36-58.
    20. Muchnik, Lev & Bunde, Armin & Havlin, Shlomo, 2009. "Long term memory in extreme returns of financial time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(19), pages 4145-4150.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ajarec:v:69:y:2025:i:2:p:453-470. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/aaresea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.