Do the Spot and Futures Markets for Commodities in India Move Together?

Ranajit Chakraborty and Rahuldeb Das

International Journal of Financial Economics, 2015, vol. 4, issue 3, 150-159

Abstract: The objective of this paper is to study the relationship between spot and futures prices of commodities in the Indian commodity market. Few agricultural and non-agricultural commodities have been involved in analyzing the co-movements of the spot and the futures prices. Long-run and short-run cointegartions between spot and futures prices have been tested for the selected commodities. The lead/lag relationship between spot and futures prices has been examined by using Granger causality test. The study shows that spot and futures prices are cointegrated in long-run for most of the commodities. Information spillover observed form spot market to spot market for most of the commodities. Moreover, the Granger causality test shows that spot prices are the Granger cause of futures prices for all the commodities except the index MCXAGRI. Bi-directional information is also observed flow for a number of commodities.

Keywords: Long-run cointegration; information spillover; Granger Causality; bi-directional information flow (search for similar items in EconPapers)
Date: 2015
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