Major International Information Flows Across the Safex Wheat Market

Abstract

We study information flows across four wheat futures markets on four continents: Zhengzhou Commodity Exchange (ZCE), South African Futures Exchange (SAFEX), Euronext/Liffe and Kansas City Board of Trade (KCBT). Three approaches for studying information flows among non-synchronous markets are applied: cointegration techniques, vector autoregressive analysis and multiple regression proposed. Although comparable underlying assets are traded in the four markets, our results indicate that no long-run links exist among them. ZCE is by far the most endogenous market, and Euronext/Liffe is the most exogenous one. Finally, the model points to KCBT as the most influential and sensitive wheat market. Our findings indicate that the relative openness of the SAFEX wheat market supports information flows and linkages from KCBT and Euronext/Liffe. Therefore, our results suggest that more supportive policies to incentivise higher wheat production in South Africa are required to mitigate the impact of price shocks emanating from the global wheat markets. JEL Classification: C32, G15, G23

Speculative Activity and Returns Volatility of Chinese Major Agricultural Commodity Futures

“…Their tests show that cotton and soybeans futures markets were integrated, whereas the corn futures markets were not integrated after the structural change. A relatively new study by Motengwe and Pardo (2016) explores information flows across four wheat futures markets on four continents, namely ZCE, South African Futures Exchange (SAFEX), Euronext, Liffe and Kansas City Board of Trade (KCBT). The study finds no evidence for long-run relationships among the markets examined.…”