Cross-market soybean futures price discovery: does the Dalian Commodity Exchange affect the Chicago Board of Trade?
In this paper, we examine the role that the Dalian Commodity Exchange (DCE) plays in the global price discovery of soybean futures. We employ Structural Vector Autoregressive and Vector Error Correction models on the returns of the DCE and the Chicago Board of Trade (CBOT) soybean futures during trading and non-trading hours, and the result suggests that information transfers between DCE and CBOT in both directions, in particular that the DCE soybean futures prices influence price discovery in CBOT. Furthermore, the impulse response analysis and forecasted error variance decomposition show that the information transfer from DCE to CBOT is at a similar magnitude as that from CBOT to DCE. This shows that the DCE plays a prominent role in the global soybean futures price discovery. This conclusion differs from much of the literature, which mainly shows that the DCE is a satellite market and is dominated by the CBOT.
Volume (Year): 13 (2013)
Issue (Month): 4 (March)
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