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Title: Market efficiency in Indian commodity futures markets
Authors: Kumar, Brajesh
Pandey, Ajay
Keywords: Long run efficiency
Short run efficiency
Commodity markets, India
Indian commodity futures markets
Time varying risk premium
Issue Date: 31-Dec-2013
Publisher: Emerald Group Publishing Limited
Citation: Kumar, Brajesh and Pandey, Ajay (2013). Market efficiency in Indian commodity futures markets. Journal of Indian Business Research, Vol.5 No. 2: 101-121.
Abstract: Abstract: In this paper, the authors aim to investigate the short‐run as well as long‐run market efficiency of Indian commodity futures markets using different asset pricing models. Four agricultural and seven non‐agricultural (gold, silver, aluminium, copper, zinc, crude oil and natural gas) commodities have been tested for market efficiency and unbiasedness. The long‐run market efficiency and unbiasedness is tested using Johansen co-integration procedure while allowing for constant risk premium. Short‐run price dynamics is investigated with constant and time varying risk premium. Short‐run price dynamics with constant risk premium is modeled with ECM model and short‐run price dynamics with time varying risk premium is modeled using ECM‐GARCH in‐Mean framework. As far as long‐run efficiency is concerned, the authors find that near month futures prices of most of the commodities are co-integrated with the spot prices. The co-integration relationship is not found for the next to near months’ futures contracts, where futures trading volume is low. The authors find support for the hypothesis that thinly traded contracts fail to forecast future spot prices and are inefficient. The unbiasedness hypothesis is rejected for most of the commodities. In context of Indian commodity futures markets, probably this is the first study which explores the short‐run market efficiency of futures markets in time varying risk premium framework. This paper also links trading activity of Indian commodity futures markets with market efficiency.
Description: Pdf not available, only citation
Scopus Index
ISSN: 1755-4195
Appears in Collections:JGU Research Publications

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