Price Discovery in the Black Pepper Market in Kerala, India

Aviral Chopra and David A. Bessler
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Aviral Chopra and David A. Bessler: Department of Agricultural Economics, Texas A&M University, College Station, TX 77843, USA
Authors registered in the RePEc Author Service: David A. Bessler ()

Indian Economic Review, 2005, vol. 40, issue 1, 1-21

Abstract: We explore empirically the incidence of price discovery for black pepper in the spot market and the nearby and first distant futures markets with October 2001 to February 2003 daily data from Kerala, India. Modern time series methods of cointegration and directed acyclic graphs show that price information is discovered in the futures market; evidence is ambiguous as to whether that discovery is in the nearby (the month closest to delivery) or distant contract (delivery beyond one month into the future). This evidence is somewhat different from that reported from the United States where, for agricultural commodities, the nearby contract is clearly the centre of price discovery. Possible reasons for this difference in incidence of price discovery are discussed and questions for future research are proposed.

Keywords: Pepper; Cointegration; Directed Acyclic Graphics; Futures Markets (search for similar items in EconPapers)
JEL-codes: C49 G13 (search for similar items in EconPapers)
Date: 2005
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