Nonlinear Granger Spillover Effect of Sugar spot and Futures

Abstract

—The futures market can effectively stabilize the spot market price through its own price discovery
function and risk transfer function. In recent years, China's sugar market has been affected by factors such as
production and imports, and prices have fluctuated greatly. Under this background, it is of great practical
significance to study the relationship between China's sugar futures market and spot market prices, and to
analyze the extent to which the price discovery function of the futures market provides a theoretical basis for
further development and improvement of the agricultural product market system. This paper is based on the
data of white sugar spot and futures from January 6, 2006 to January 6, 2020, through the setting of VAR
model, using unit root test, traditional linear Granger causality test, HJ test, DP test, etc. Analyze and study
the nonlinear relationship between sugar spot and futures. The empirical results show that during the sample
period, the impact of white sugar spot on the return of white sugar futures showed a significant nonlinear
relationship. Secondly, on the nonlinear Granger causality, there is a two-way spillover effect of sugar spot
and futures returns.