Exploring the nexus between futures contracts and spot returns in the Indian commodity market

P. Lakshmi, S. Visalakshmi and S. Padmavathy

International Journal of Indian Culture and Business Management, 2015, vol. 10, issue 3, 306-317

Abstract: The purpose of this paper is to explore the nexus between spot returns and futures contracts for crude oil, gold and study whether future trading volume react faster to news and help to predict spot returns. We examine the effect in the Indian context using data from the multi commodity exchange (MCX) of India from January 2005 until May 2012. The vector autoregressive model (VAR), Granger causality Wald test, variance decomposition and impulse response function are applied to the data collected. The results exhibited that for both crude oil and gold, the future trading volume is influenced by its own past than the past spot returns. Further, bidirectional causality runs from gold spot returns to gold futures trading volume. Contrarily, we do not have sufficient evidence to support that crude futures trading volume aid in the forecast of crude spot returns in India. Overall, the finding implies that gold futures trading volume react faster to information and help to predict the gold spot returns than crude oil in the Indian commodity markets.

Keywords: crude oil; gold; multi commodity exchanges; MCX; vector autoregressive model; VAR; variance decomposition; impulse response; India; futures contracts; spot returns; commodity markets; trading volumes. (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.inderscience.com/link.php?id=68493 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:ijicbm:v:10:y:2015:i:3:p:306-317

Access Statistics for this article

More articles in International Journal of Indian Culture and Business Management from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().