Performance Evaluation of Agricultural Commodity Futures Market in India

G R Sayee Prasanna

The IUP Journal of Applied Finance, 2014, vol. 20, issue 1, 34-45

Abstract: The agricultural commodity futures market in India is constantly evolving due to favorable government policies and continuous reforms since 2002. An important function of the futures market is to aid in efficient price discovery. However, heightened volatility, induced by speculation has arguably distorted prices. This study aims at examining the gaps in the functioning of agricultural commodity futures market by using Johansen’s Cointegration, Granger Causality and Johansen’s Vector Error Correction Model (VECM). The results indicate oscillating leadership in price discovery between futures and spot markets depending upon the nature of the commodity, time to maturity of the contracts and liquidity in the market. The findings of the paper underscore the need for active intervention by the regulators.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:icf:icfjaf:v:20:y:2014:i:1:p:34-45

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