A Study on Lead-Lag Relationship between Futures and Spot Markets in Case of Agricultural Commodity Derivatives in India
Journal Title: International Journal of Business Management & Research (IJBMR) - Year 2017, Vol 7, Issue 4
Abstract
The two major economic functions of a commodity futures market are price risk management and price discovery. The effectiveness of the price risk management depends on how efficiently the futures market fulfills the price discovery function. The main objective of this study is to examine the lead-lag relationship between the futures and spot markets in case of select agricultural commodity derivatives traded in India. National Commodity and Derivatives Exchange Limited (NCDEX) being the largest agricultural commodity futures trading platform was purposively selected among all the National Commodity Exchanges functioning in the country. The sampling design used for the study is proportionate sampling which consists of five agricultural commodity derivatives viz. refined soya oil, guar seed, chana, soya bean and castor seed which were traded on the NCDEX platform. The study was purely based on secondary data which was drawn from the official website of NCDEX. The data comprised of daily closing spot prices and futures prices with near month (expiration month) maturity pertaining to the sample agricultural commodity derivatives traded on the exchange. The period of study was from January 2004 to November 2016. The lead-lag relationship between futures and spot prices of the sample agricultural commodity derivatives has been examined using VECM and Granger Causality test. In the long run, futures return was leading the spot return in case refined soya oil and chana. Similarly spot return was leading the futures return in case of soya bean and castor seed. In the short run, futures return was leading spot return in case of guar seed and spot return was leading futures return in case of castor seed. There was a bidirectional causality found in case of refined soya oil, chana and soya bean.
Authors and Affiliations
Ranganath . , R. Venkatram, K. Mahendran
Keywords
Related Articles
- EP ID EP239046
- DOI -
- Views 101
- Downloads 0
Feedback & Its Relevance in Communication
The Shannon-Weaver’s Model of Communication fences communication out to the transmission of message from sender to the receiver. It is a linear process with subsequent to’s and fro’s. It also talks about various external...
“What Work” and “What Doesn't Work” in Rehabilitation of Offenders: A General Perspective
At present, Rehabilitation of offenders is a momentous issue of concern among all correction department of the world. (Astbury 2008). The major reason being that, in spite of passing gets tough sentences, the world priso...
A STUDY ON THE PROBLEM CONSCIOUSNESS OF QUALITY MANAGEMENT IN CHINA
Japanese Total Quality Management (TQM) is famous all over the world, and has especial impact on the Chinese factory. China has been introduced and carried out the technique and management of Japanese TQM. But the level...
Evaluating the Impact of the Determinants of E-Commerce Customer Trust and Satisfaction
Online shopping has become one of the commonly and broadly used channels in the Internet fraternity for convenient shopping. Many websites are opening daily to meets the ever-rising demands of comfort and convenience sho...
Impact of Multimodal Choice on Any Organisation’s Sustainable Supply Chain Strategies
This paper explores on the impact of multimodal or intermodal choice on any organisation’s sustainable supply chain strategies. It is a phenomenological approach in nature of very subjective to interpret data. This paper...