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Abstract

China has faced a skyrocketing rise in the corn demand derived from the feed and ethanol production industries. This has caused China to import a tremendous amount of corn from the U.S. recently. So, the information flows between the corn future markets in the U.S. and China are expected to be brisk. A bivariate AR-ARCH model was used to analyze the information flows between the corn futures markets of the Dalian Commodity Exchange (DCE) and the Chicago Board of Trade (CBOT) concerning the two corn futures' daily closing price time series from September 22, 2004 to December 29, 2006. The estimation results were as follows: ① The DCE corn futures market showed a strong autocorrelation, and its return of previous day made a negative impact on today's; and a so much bigger short-term volatility was found in DCE than CBOT. ② The DCE corn futures market was under a strong influence of CBOT's in respect of price information transmission but not vice versa. ③ Nonetheless, these two markets made price adjustments to each other in the long run, and the speed of adjustment was faster in CBOT than DCE. ④ Any price volatility information spillover has not been made between the CBOT and DCE corn futures markets.

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