Please use this identifier to cite or link to this item: http://hdl.handle.net/10739/769
Title: International linkages of the Indian commodity futures markets
Authors: Kumar, Brajesh
Pandey, Ajay
JGBS
IIM, Ahmedabad
Keywords: International Linkages
Commodity Futures Markets
Return Spillover
Volatility Spillover
Variance Decomposition Techniques
Issue Date: 31-Dec-2011
Publisher: Scientific Research
Citation: Modern Economy, Vol. 2 No. 3 (2011) 213-227
Abstract: This paper investigates the cross market linkages of Indian commodity futures for nine commodities with futures markets outside India. These commodities range from highly tradable commodities to less tradable agricultural commodities. We analyze the cross market linkages in terms of return and volatility spillovers. The nine commodities consist of two agricultural commodities: Soybean, and Corn, three metals: Aluminum, Copper and Zinc, two precious metals: Gold and Silver, and two energy commodities: Crude oil and Natural gas. Return spillover is investigated through Johansen’s cointegration test, error correction model, Granger causality test and variance decomposition techniques. We apply Bivariate GARCH model (BEKK) to investtigate volatility spillover between India and other World markets. We find that futures prices of agricultural commodities traded at National Commodity Derivatives Exchange, India (NCDEX) and Chicago Board of Trade (CBOT), prices of precious metals traded at Multi Commodity Exchange, India (MCX) and NYMEX, prices of industrial metals traded at MCX and the London Metal Exchange (LME) and prices of energy commodities traded at MCX and NYMEX are cointegrated. In case of commodities, it is found that world markets have bigger (unidirectional) impact on Indian markets. In bivariate model, we found bi-directional return spillover between MCX and LME markets. However, effect of LME on MCX is stronger than the effect of MCX on LME. Results of return and volatility spillovers indicate that the Indian commodity futures markets function as a satellite market and assimilate information from the world market.
URI: http://file.scirp.org/Html/6414.html
http://hdl.handle.net/10739/769
ISSN: 2152-7245
Appears in Collections:JGU Research Publications

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