Abstract
To explore the price discovery function of the Treasury bond future in China, we adopt the Vector Auto Regressive Model and the Vector Error Correction (VEC) Model to analyse 270 sets of data collected from September 6th, 2013 to October 24th, 2014. The empirical results show that: firstly, the Treasury bond future Granger causes the treasury spot. Although the Treasury bond future is mainly affected by itself, it delivers a huge blow to the treasury spot; secondly, there is a long-term stable co-integration relationship between the Treasury bond future and treasury spot; and especially, the Treasury bond future makes a greater and faster adjustment than the treasury spot. So we can conclude that the Treasury bond future can realize its function of price discovery well in Chinese capital market.
