Abstract

This study examines causal relationships between international food commodity prices and daily stock indices in China, including Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE), during 2000-2010. The empirical results show that both China’s stock indices have bilateral Granger causality relationships with international food commodity futures including wheat, corn, soybean, and soybean oil, while rough rice is found to have a unilateral Granger causal relationship with these stock indices. The study further extends to examine the impulse-response analysis among Granger causal relationships and both positive and negative responses are found. The stock price indices have negative responses to the increase of food future prices, while food future prices have positive responses to the increase of China’s stock indices.

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