Price Discovery in Indian Commodity Futures Market: An Empirical Exercise

Dey, Kushankur and Maitra, Debasish (2012) Price Discovery in Indian Commodity Futures Market: An Empirical Exercise. International Journal of Trade and Global Markets, 5 (1). pp. 68-87.

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Abstract

The Indian commodity futures market is of recent introduction,albeit, it was in existence in a crude form a few centuries ago. After the opening of national level exchanges post 2002, the landscape of this market has witnessed phenomenal growth in terms of products on offer, trade volume,participation, and spatial distribution. In this paper, pepper has been selected as a commodity to explore the price discovery process through a series of tests,namely, Granger causality, co-integration, error correction with weak exogeneity, and forecast error variance decomposition. This paper sheds some light on existing methods of price discovery mechanism through some insightful inferences that unidirectional causality from futures to spot prices has been observed in the Indian pepper futures market. However, the adjustment of innovations or shocks in the futures market is relatively faster than that of the spot market.

Item Type:	Article
Uncontrolled Keywords:	price discovery; cointegration; causality; error correction; weak exogeneity.
Subjects:	Finance > Financial Economics
Divisions:	Finance and Strategy
Depositing User:	Mr. Muralidhara D
Date Deposited:	24 Sep 2018 09:17
Last Modified:	04 Feb 2019 10:41
URI:	http://tapmi.informaticsglobal.com/id/eprint/144

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