PREDICTABILITY AND MARKET EFFICIENCY IN AGRICULTURAL FUTURES MARKETS: A PERSPECTIVE FROM PRICE-VOLUME CORRELATION BASED ON WAVELET COHERENCY ANALYSIS

摘要

In this paper, we use a time-frequency domain technique, namely, wavelet squared coherency, to examine the associations between the trading volumes of three agricultural futures and three different forms of these futures' daily closing prices, i. e. prices, returns and volatilities, over the past several years. These agricultural futures markets are selected from China as a typical case of the emerging countries, and from the US as a representative of the developed economies. We investigate correlations and lead-lag relationships between the trading volumes and the prices to detect the predictability and efficiency of these futures markets. The results suggest that the information contained in the trading volumes of the three agricultural futures markets in China can be applied to predict the prices or returns, while that in US has extremely weak predictive power for prices or returns. We also conduct the wavelet analysis on the relationships between the volumes and returns or volatilities to examine the existence of the two "stylized facts" proposed by Karpoff [J. M. Karpoff, The relation between price changes and trading volume: A survey, J. Financ. Quant. Anal. 22(1) (1987) 109-126]. Different markets in the two countries perform differently in reproducing the two stylized facts. As the wavelet tools can decode nonlinear regularities and hidden patterns behind price-volume relationship in time-frequency space, different from the conventional econometric framework, this paper offers a new perspective into the market predictability and efficiency.