Linkages among the non-genetically modified soybean, conventional soybean, and corn futures markets in the Tokyo Grain Exchange

Aruga, Kentaka (2011): Linkages among the non-genetically modified soybean, conventional soybean, and corn futures markets in the Tokyo Grain Exchange.

Abstract

The market linkages among the non-genetically modified (non-GM) soybean, conventional soybean, and cor futures markets at the Tokyo Grain Exchange are investigated to find out if the two soybean futures markets and the corn futures market share price information in the presence of unknown breaks. The results reveal that there are market linkages between the non-GM and conventional soybean futures prices and between the non-GM soybean and corn futures prices and that these markets do influence one another. Yet the breaks found in the soybean futures price affected these linkages and there were periods where the two soybean and corn futures markets were not cointegrated. Hence these markets are efficient when the effect from the breaks is not apparent but they become inefficient when the breaks are affecting the three markets.

• Item Type: MPRA Paper
• Language: English
• Keywords: non-genetically modified soybeans; conventional soybeans; corn; cointegration test; structural change
• Subjects: G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q13 - Agricultural Markets and Marketing ; Cooperatives ; Agribusiness; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q14 - Agricultural Finance

References

Andrews, D. W. K. 1993.“Testing for Parameter Instability and Structural Change with Unknown Change Point.” Econometrica, 61(4): 821-856.

Andrews, D. W. K., and Ploberger, W. 1994.“Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative.” Econometrica, 62(6): 1383-1414.

Asche, F., Bremnes, H., and Wessells, C. R. 1999.“Product Aggregation, Market Integration, and Relationships between Prices: An Application to World Salmon Markets.” American Journal of Agricultural Economics, 81(3): 568-581.

Bai, J., and Perron, P. 1998.“Estimating and Testing Linear Models with Multiple Structural Changes.” Econometrica, 66(1): 47-78.

Bai, J. 2003a.“Computation and Analysis of Multiple Structural Change Models.” Journal of Applied Econometrics, 18(1): 1-22.

Bai, J. 2003b.“Critical Value for Multiple Structural Change Tests.”Econometrics Journal, 6(1): 72-78.

Bai, J. 2006.“Multiple Structural Change Models: A Simulation Analysis.” In D. Corbea, S. D., and B. E. Hansen (Eds.), Econometric Theory and Practice: Frontiers of Analysis and Applied Research (pp.212-40). Cambridge, U.K.: Cambridge University Press.

Booth, G., and Ciner, C. 2001.“Linkages among Agricultural Commodity Futures Prices: Evidence from Tokyo.” Applied Economics Letters, 8(5): 311-313.

Chen, G., Firth, M, and Rui, O. M. 2002.“Stock Market Linkages: Evidence from Latin America.” Journal of Banking and Finance, 26(6): 1113-1141.

Chow, G. C. 1960.“Tests of Equality Between Sets of Coefficients in Two Linear Regressions.” Econometrica, 28(3): 591-605.

Chowdhury, A. R. 1991.“Futures Market Efficiency: Evidence from Cointegration Tests.” The Journal of Futures Markets, 11(5): 577-589.

Dickey, D. A., and Fuller, W. A. 1979.“Distribution of the Estimators for Autoregressive Time Series with Unit Root.” Journal of the American Statistical Association, 74(366): 427-431.

Goodwin, B. K., and Schroeder, T. C. 1991.“Cointegration Tests and Spatial Price Linkages in Regional Cattle Markets.” American Journal of Agricultural Economics, 73(2): 452-464.

Hansen, B. E. 2000.“Testing for Structural Change in Conditional Models.”Journal of Econometrics, 97(1): 93-115.

Harbest Futures Inc. 2009.“Gengetsu no Narabi Ichiran-hyou” (Table of the contract months order). Harbest Futures Inc. http://www.harbest.co.jp (accessed January 6, 2009).

International Monetary Fund (IMF). 2009.“IMF Primary Commodity Prices.”http://www.imf.org/external/np/res/commod/index.asp (accessed January 6, 2009).

Johansen, S., and Juselius, K. 1990.“Maximum Likelihood Estimation and Inference on Cointegration: With Applications to the Demand for Money.” Oxford Bulletin of Economics and Statistics, 52(2): 169-210.

Malliaris, A. G., and Urrutia, J. L. 1996.“Linkages Between Agricultural Commodity Futures Contracts.”The Journal of Futures Markets, 16(5): 595-609.

McCluskey, J. J., Grimsrud, K. M., Ouchi, H., and Wahl, T. I. 2003.“Consumer response to genetically modified food products in Japan.” Agricultural and Resource Economics Review, 32(2): 222-231.

Ministry of Agriculture, Forestry and Fisheries (MAFF). 2009.“Heisei 19 Nendo Shokuryou Jyukyu-hyou” (2007 Food Demand and Supply Table). http://www.maff.go.j/j/zyukyu/fbs/ (accessed January 20, 2009).

Ministry of Health, Labour and Welfare (MHLW). 2001. “Idenshi-Kumikae-Shokuhin ni Kansuru Hyouji ni tuite” (About the labeling on genetically modified food products). http://www.mhlw.go.jp/topics/0103/tp0329-2c.html (accessed July 2, 2008).

OMNICO Corp. 2007.“Market Analysis from Supply and Demand.” Online Catalogue 2007 Vol. 2. OMNICO Corp. http://www.omnico.co.jp/ (accessed January 20, 2009).

Parcell, J. L. 2001.“An Initial Look at the Tokyo Grain Exchange Non-GM Soybean Contract.”Journal of Agribusiness, 19(1): 85-92.

Quandt, R.E. 1960.“Tests of Hypothesis that a Linear Regression System Obeys Two Separate Regimes.”Journal of American Statistical Association, 55: 324-330.

Repach, D. E., and Wohar, M. E. 2006.“Structural Breaks and Predictive Regression Models of Aggregate U.S. Stock Returns.”Journal of Financial Econometrics, 4(2): 238-274.

Tokyo Grain Exchange. 2002. Annual Report 2002. Tokyo Grain Exchange:126-129.

Tokyo Grain Exchange. 2003. Tokyo Kokumotsu Shouhin-tirihiki-jyo Gojyu-nen-shi (Fifty Year History of Tokyo Grain Exchange) (pp.204-07). Tokyo Grain Exchange.

Tokyo Grain Exchange. 2008a. Conventional and Non-GM Soybeans, and Corn Price Quotes. Tokyo Grain Exchange. http://www.tge.or.jp (accessed January 20, 2009).

Tokyo Grain Exchange. 2008b. “Ippan-daizu no Torihiki-tani-henkou ni tomonau Torihiki-youkou tou no Gaiyou” (Glossary of the trading after the change in the trading unit for the conventional soybeans). Tokyo Grain Exchange.

United Nations. 2009. World Economic Situation and Prospects - Global Outlook 2009. NewYork: United Nations.

Xu, X. E., and Fung, H.-G. 2005.“Cross-market Linkages between U.S. and Japanese Precious Metals Futures Trading.” Journal of International Financial Markets Institutions and Money, 15(2):107-124.