Market development and policy issues for agri-derivatives in India: a study of cotton and mentha

Agrawal, Tarunika Jain; Sehgal, Sanjay; Kumar, Muneesh

doi:10.5958/0974-0279.2020.00011.7

Cited by 1 publication

(1 citation statement)

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“…Inani (2018) also confirmed that futures prices of agricultural commodities are more efficient in price discovery. Agrawal et al (2020) examined the information efficiency in Indian agricultural commodity derivatives market and results indicated that spot market leads price discovery in case of cotton while in mentha, the price discovery leads by futures market. Jore (2018) studied the volatility in gold, silver and copper metals in India covering the period from January 2014 to December 2016 by applying GARCH (1, 1) model.…”

Section: Nmims Management Reviewmentioning

confidence: 99%

Price Discovery and Volatility Spillover in Commodity Futures and Spot Market in India: An Empirical Analysis

Garg¹,

Narwal²

2022

NMMR

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Purpose: This paper aims to investigate the price discovery process, persistence of volatility and spillover of volatility in commodity futures and spot market in India. Methodology: In this paper, commodities namely, mentha oil, cotton, gold and aluminium have been selected to explore the process of price discovery, volatility persistence and spillover of volatility using cointegration test, vector error correction (VECM), granger causality and GARCH model. Findings: The results of VECM suggest that price discovery takes place in futures market in case of all commodities except for mentha oil where price discovery occurs in spot market. The Block Exogeneity Wald test (granger causality) results also show that futures market has stronger ability to predict the spot prices. The results of GARCH model indicate that volatility is persistent for all commodities except mentha oil futures return. In the support of VECM and granger causality test results, GARCH model results also indicate that volatility spillovers from futures return to spot return for all selected commodities except cotton where volatility spillovers from spot return to futures return. Practical Implications: The findings of this study significantly contribute to the Indian commodity derivatives market literature and useful for future researchers, investors, hedgers, economists and policy makers. Originality: There are very few studies that have examined the price discovery process and spillover of volatility using combination of both agricultural and nonagricultural commodities in India.

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Section: Nmims Management Reviewmentioning

confidence: 99%