Empirical Research on Efficiency of Chinese Futures Markets Based on GARCH Model

The efficiency research is one of the most important parts of futures markets research, because the efficiency condition of a futures market is an important symbol which evaluates whether the futures market is normal and mature and whether the futures market can perform its function well. This paper aims to study the current efficiency of Chinese futures markets. Firstly, EMH and its test methods are reviewed and it is indicated that the weak form efficiency is not equal to the traditional independent identical distribution random walk process, but actually equal to the martingale process. So the classical methods for weak form efficiency test, which have not considered financial time series´ significant characteristics of leptokurtosis, fat tails and time-varying variance, easily lead to incorrect statistical results. Thus, in order to solve this problem, AR-GARCH model, which considers the dependency of return´s high order conditional moment, is adopted to empirically study the efficiency of Chinese three futures markets from 1999 till now. The results show that the soybean, soybean No.1, wheat and copper futures markets have still not reached the weak form efficiency. Finally, some policy suggestions, which help to improve the efficiency of Chinese futures markets, are given