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The trilogy of China cotton markets: The lead–lag relationship among spot, forward, and futures markets
Author(s) -
Demir Mert,
Martell Terrence F.,
Wang Jun
Publication year - 2019
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21981
Subject(s) - futures contract , speculation , china , forward market , business , economic interventionism , lead (geology) , futures market , government (linguistics) , price discovery , economics , market economy , financial economics , finance , geography , political science , linguistics , philosophy , archaeology , geomorphology , politics , geology , law
China is a leading participant in the world cotton market. China’s distinctive regulatory structure and procedures and business environment provide an opportunity to explore some unique market dynamics. This study investigates the interrelationship among the spot, futures, and forward cotton markets in China over a period of a major policy change: A temporary State reserve program for cotton that was established in 2011 and ended in 2014. This government intervention significantly distorted the way farmers, manufacturers, and speculators interacted and was not sustainable. Overall, our results support futures market’s dominant role in the price discovery process.