Dynamic Relation Mechanism between Cotton Future Price and Stock Price of Related Listed Companies

The Dynamic relation mechanism between ZCE cotton futures price and related listed company stock price had been studied based on the metastock historical data in January 1st, 2007 to September 1st, 2010,Johansen co-integration analysis, Vector error correction model, Granger causality test and variance decomposition method. The results indicated that: long-term equilibrium relationship existed between ZCE cotton futures price and Xinsai share stock price while which changed in the same tendency and speed in the long-term. Cotton futures price is the main reason for the changing of Xinsai share stock price. The lead-lag relationship in changing course had been confirmed that existed between ZCE cotton futures price and the Xinsai share stock price. Meanwhile, the forward pass mechanism of price changing information had been found only from the ZCE cotton futures market to the stock market while showing asymmetry. Conclusions of the study can be used for cotton and related corporate to hedge business risks by the cotton price changes.