Functional Effectiveness of Commodity Futures Market: A Comparative Assessment of Agricultural and Metal Commodities

Rout, Bhabani Sankar; Das, Nupur Moni; Rao, K. Chandrasekhara

doi:10.1177/09718907211023594

Cited by 4 publications

(2 citation statements)

References 37 publications

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“…Many studies have been undertaken to understand the dynamics of Indian and global commodity markets, focusing on evaluating different methods for determining hedging effectiveness. (Rout et al, 2021b) explored how successful the Indian commodity futures market has been in its roles of price discovery and effective hedging. To gauge hedging efficacy, several initial tests need to be carried out (Benada, 2017;Bhatia, et al, 2018;Lien et al, 2002).…”

Section: Literature Reviewmentioning

confidence: 99%

Hedging Efficiency of Energy Commodities between Indian and American Commodity Exchanges: Constant and Time-Varying Approaches

Rajesh,

Nandini

2023

IJEEP

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This research paper investigates the hedging efficiency between spot and future prices of crude oil and natural gas commodities in the energy category of the commodity market. The study focuses on two major commodity exchanges, the Multi Commodity Exchange of India (MCX) and the New York Mercantile Exchange (NYMEX), which serve as the global benchmarking commodity market. Various econometric models have been incorporated to measure constant and time-varying hedging efficiency, we analyze the potential of futures contracts in mitigating price risks in these markets. The results indicate significant and consistent hedge ratios for both crude oil and natural gas in both the MCX and NYMEX markets. Moreover, the MGARCH model, which assesses hedging that varies over time, demonstrates the ability to adjust hedging positions based on market changes. Johansen's co-integration test endorses the presence of enduring connections between spot and future prices in both exchanges. Traders and investors can effectively use futures contracts to mitigate price risks in energy commodity markets, ensuring more dependable financial outcomes amid price fluctuations. Additionally, policymakers can utilize these research findings to promote the adoption of futures contracts, make well-informed choices, manage risks effectively, and enhance the overall efficiency and stability of energy commodity markets.

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Section: Literature Reviewmentioning

confidence: 99%

Hedging Efficiency of Energy Commodities between Indian and American Commodity Exchanges: Constant and Time-Varying Approaches

Rajesh,

Nandini

2023

IJEEP

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“…Futures prices provide the necessary indications of the future-ready (spot) price and demand and supply conditions for the various producers and consumers (Rout et al 2021a). The futures price is the price at which the contract is undersigned for purchasing or selling goods or services that are to be sold or purchased at a future date.…”

Section: Introductionmentioning

confidence: 99%

Price Discovery Mechanism and Volatility Spillover between National Agriculture Market and National Commodity and Derivatives Exchange: The Study of the Indian Agricultural Commodity Market

Garg

Singhal

Sood

et al. 2023

JRFM

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Agricultural commodity markets are critical to the global economy. This study investigates the price discovery mechanism, lead-lag relationship, and volatility spillover between spot prices on the National Agriculture Market (E-NAM) and futures and spot prices on the National Commodity and Derivative Exchange (NCDEX) in the Indian agricultural commodity market. The Johansen Cointegration, Vector Error Correction (VEC), Granger causality tests, and bivariate GARCH models were applied to daily data from April 2016 to December 2020 for twelve agricultural commodities traded on the E-NAM and NCDEX. We discovered the long-run relationship using the Johansen Cointegration test and concluded that the NCDEX spot and futures market is dominant in the price discovery mechanism, and the NCDEX futures and spot markets lead the E-NAM spot prices having a unidirectional or bidirectional relationship. Furthermore, the bivariate GARCH model suggested a volatility spillover from E-NAM spot prices to NCDEX futures and spot markets for most commodities, except for bajra, barley, and jeera, which have no volatility spillover. The study’s findings have important implications for various stakeholders, including policymakers, farmers, investors, traders, and others who want to reduce price risks by using information from the E-NAM market’s spot prices.

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Examining the efficiency and herding behavior of commodity markets using multifractal detrended fluctuation analysis. Empirical evidence from energy, agriculture, and metal markets

2022

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Functional Effectiveness of Commodity Futures Market: A Comparative Assessment of Agricultural and Metal Commodities

Cited by 4 publications

References 37 publications

Hedging Efficiency of Energy Commodities between Indian and American Commodity Exchanges: Constant and Time-Varying Approaches

Hedging Efficiency of Energy Commodities between Indian and American Commodity Exchanges: Constant and Time-Varying Approaches

Price Discovery Mechanism and Volatility Spillover between National Agriculture Market and National Commodity and Derivatives Exchange: The Study of the Indian Agricultural Commodity Market

Examining the efficiency and herding behavior of commodity markets using multifractal detrended fluctuation analysis. Empirical evidence from energy, agriculture, and metal markets

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