i-manager Publications

Market Behavior and Price Discovery in Indian Commodity Markets

Mihir Dash*

*HOD, Department of Quantitative Methods, School of Business, Alliance University, Bangalore, India.

Periodicity:June - August'2016
DOI : https://doi.org/10.26634/jmgt.11.1.8070

Abstract

The study analyzes the market behavior and causality effects between spot and futures prices in Indian commodity markets. The pattern is quite different for different commodities. Commodities that suffer from chronic backwardation should be analyzed in more detail, in order to understand the causes, and controls (known as backwardation limits) should be instituted for the same. Causality in commodities markets can be used to either hedge or speculate price movements: if changes in spot prices drive changes in futures prices, efficient hedging strategies can be formulated; whereas, if changes in futures prices drive changes in spot prices, efficient speculation strategies can be formulated. Further, causality can be used in forecasting commodity spot and futures prices.

Keywords

Commodity Markets, Spot and Futures Prices, Contango, Backwardation, Causality Effects.

How to Cite this Article?

Dash, M. (2016). Market Behavior and Price Discovery in Indian Commodity Markets. i-manager’s Journal on Management, 11(1), 12-19. https://doi.org/10.26634/jmgt.11.1.8070

References

[1]. Garbade, K. D., and Silber, W.L. (1983). “Price movements and price discovery in futures and cash markets”. The Review of Economics and Statistics, Vol. 65, No. 2, pp. 289-299.

[2].Geweke, J. (1982). “Measurement of linear dependence and feedback between multiple time series”. Journal of the American Statistical Association, Vol. 77, No. 378, pp. 304-313.

[3]. Granger, C.W.J. (1969). “Investigating causal relations by econometric models and cross-spectral methods”. Econometrica, Vol. 37, No. 3, pp. 424-438.

[4]. Koontz, S.R., Garcia, P., and Hudson, M.A. (1990). “Dominant-satellite relationships between live cattle cash and futures markets”. The Journal of Futures Markets, Vol.10, No. 2, pp. 123-136.

[5]. Mattos, F., and Garcia, P. (2004). “Price Discovery in Thinly Traded Markets: Cash and Futures Relationship in Brazilian Agricultural Futures Market”. Proceedings of the NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Risk Management. Retrieved from http://www.farmdoc.uiuc.edu/nccc134

[6]. Nath, G.C, and Lingareddy, T. (2008). “Commodity Derivative Market and its Impact on Spot Market”. SSRN Working Paper Series. Retrieved from http://ssrn.com/ abstract=1087904

[7]. Nitesh Ranjan, (2005). “Role of Commodity Exchanges, Futures & Options–A Case Study on Soya Oil”. Occasional Paper 46, Department of Economic Analysis and Research, NABARD.

[8]. Oellermann, C.M., Brorsen, B.W., and Farris, P.L. (1989). “Price discovery for feeder cattle”. The Journal of Futures Markets, Vol. 9, No. 2, pp. 113-121.

[9]. Sahi, Gurpreet S. (2006). “Influence of Commodity Derivatives on Volatility of Underlying,” SSRN Working Paper Series Retrieved from http://ssrn.com/abstract =953594

[10]. Schroeder, T.C., and Goodwin, B.K. (1991). “Price discovery and co-integration for live hogs”. The Journal of Futures Markets, Vol.11, No. 6, pp. 685-696.

[11]. Tomek, W.G. (1980). “Price behavior on a declining terminal market”. American Journal of Agricultural Economics, Vol. 62, No. 3, pp. 434-444.

[12]. Working, H. (1942). “Quotations on Commodity Futures as Price Forecasts”. Econometrica, Vol. 10, No. 1, pp. 39-52.

[13]. Yang, J., Bessler, D. A., and Leatham, D.J. (2001). “Asset storability and price discovery in commodity futures markets: A new look”. The Journal of Futures Markets, Vol. 21, No. 3, pp. 279-300.

If you have access to this article please login to view the article or kindly login to purchase the article

Single Article

	North Americas,UK, Middle East,Europe		India	Rest of world
	USD	EUR	INR	USD-ROW
Online	15	15

ADD TO CART

Options for accessing this content:

If you would like institutional access to this content, please recommend the title to your librarian.
If you already have i-manager's user account: Login above and proceed to purchase the article.
New Users: Please register, then proceed to purchase the article.