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The Co-Movement between Non-GM and GM Soybean Prices in China: Evidence from Dalian Futures Market (2004-2014)

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  • Nanying Wang
  • Jack E. Houston

Abstract

The price variability of agricultural commodities reached record levels in 2008, and again more recently in 2010. This raises concerns that this increased price volatility would be temporal or structural. There are two soybean futures contracts in China: non-GM and GM. With the emergence of the GM soybean contract in 2004, the components of non-GM futures price volatility might have changed. This study examines the volatility determinants as well as seasonality of non-GM and GM soybean futures prices traded in Dalian Commodity Exchange from 2005 to 2014. Also, we test the co-movement between these two soybeans markets. We analyze the volatility by incorporating changes in important economic variables into the Dynamic Conditional Correlation-Generalized Autoregressive Conditional Heteroskedastic (DCC-GARCH) model. This research provides statistical evidence that the futures prices of soybeans in China are being influenced by the increasing consumption of soybeans, the import quantity of soybean, the trading volume in futures market and weather. We also find spillover effect from non-GM to GM in soybean markets. A better understanding of the volatility determinants provides important additional information for various market participants, including commodity traders, hedgers, arbitrageurs, exchanges and regulatory agencies.

Suggested Citation

  • Nanying Wang & Jack E. Houston, 2016. "The Co-Movement between Non-GM and GM Soybean Prices in China: Evidence from Dalian Futures Market (2004-2014)," Applied Economics and Finance, Redfame publishing, vol. 3(4), pages 37-47, November.
  • Handle: RePEc:rfa:aefjnl:v:3:y:2016:i:4:p:37-47
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    References listed on IDEAS

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    More about this item

    Keywords

    China; DCC-GARCH Model; time-varying correlation; macroeconomic;

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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