Financialization of Commodity Market in India: Implications for Intragroup Investing

Ipsita Saishree () and Puja Padhi ()
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Ipsita Saishree: Indian Institute of Technology Bombay
Puja Padhi: Indian Institute of Technology Bombay

A chapter in Studies in International Economics and Finance, 2022, pp 571-597 from Springer

Abstract: Abstract This study examines the intragroup co-movement pattern among the daily returns of base metals, precious metals and energy commodity futures in the Indian commodity market using the dynamic conditional correlation method. It intends to verify, whether commodity futures in India are financialized enough to move in unison despite the differences in individual factors like demand, supply, production process and usage. The results of the study confirm that returns of base metals futures and precious metals futures exhibit higher unison than energy futures, thus marking energy futures most favourable for potential diversification benefits. The measure of hedging effectiveness align with the correlation estimates. Additionally, we also conduct a demand–supply analysis of the underlying physical commodities and find that higher co-movements are observed within metal futures and energy futures when their spot market prices are lower often occurring due to low demand/high inventories and vice versa.

Keywords: Commodity futures; Financialization; DCC GARCH; Base metals; Precious metals; Energy futures; Co-movement (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:spr:isbchp:978-981-16-7062-6_29

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DOI: 10.1007/978-981-16-7062-6_29

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