Predicting Wheat Futures Prices in India

Raushan Kumar ()
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Raushan Kumar: University of Delhi

Asia-Pacific Financial Markets, 2021, vol. 28, issue 1, No 7, 140 pages

Abstract: Abstract Futures markets perform their economic roles of price discovery and hedging only when they are efficient. One of the important features of efficient market is that one cannot make abnormal profits from the futures markets by trading in it. This paper addresses the question of whether Indian wheat futures prices can be forecast. This would add to our knowledge whether wheat futures market is efficient, and would enable brokers, traders and speculators to develop profitable trading strategy. We employ the economic variable model to predict the wheat futures prices, and employ out of sample point forecasts. We also evaluate the robustness of our results by employing several alternative specifications, viz. ARMA process and artificial neural network technique. We then test the statistical significance of point forecast using the Diebold and Mariano test. We consider random walk orecast as the bench mark. In order to predict the evolution of wheat futures prices, we use traders’ expectations about the futures prices, a number of economic variables and futures prices (lagged) of wheat. The study finds that the futures price of wheat cannot be forecast, and the wheat futures market is efficient.

Keywords: Futures market; Forecasting; Artificial neural network (ANN) and agricultural derivative market (search for similar items in EconPapers)
JEL-codes: C45 G13 Q14 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10690-020-09320-6

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