The Impact of Chinese Cotton and Textile News on Cotton Futures Markets

The purpose of this thesis is to empirically investigate the impacts of Chinese cotton and textile news events on the volatility of the cotton futures prices. To accomplish this objective, a series of augmented GARCH (1, 1) models that include news events as additional explanatory variable in the conditional variance equations are employed. The news effects on cotton futures market have three cases and are tested in four aspects for each case. With the exception of cotton news events under certain conditions there is no significant evidence that Chinese cotton and textile news events have impacts on the volatility of the cotton futures prices. The cotton news events have a significant overnight marginal effect of 1.7572 on the cotton futures prices volatility at the 95% level of confidence and a significant marginal effect of 34.3992 on the cotton spot market at the 99% level of confidence.

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