ISSN: (Online) 2321 -4155
ISSN: (Print) 2320 -7000

JOURNAL OF INDIAN RESEARCH
VOLUME : 3, ISSUE : 1, January-March, 2015 (ISSN No. : 2321-4155)
 
INTRADAY LEAD/LEG RELATIONSHIPS BETWEEN THE FUTURES AND SPOT COMMODITY MARKET
Gurmeet Singh
 
ABSTRACT
The aim of this paper is to investigate the lead-leg relationships between non- precious metals – nickel and zinc-on Multi Commodity Exchange (MCX) and agricultural commodities -pepper and soybean-on National Commodities & Derivatives Exchange (NCDEX) using Johansen’s co-integration test, VECM and Granger causality test. The analysis used daily data on spot prices and near month futures prices of all the four commodities over the period from April 2011 to April 2013 which is obtained from MCX and NCDEX website. The study concludes that all the series of spot and futures prices are co-integrated of order one, and exhibit a stable long-run equilibrium relationship. The results of VECM show that there is a bi-directional causality in spot and futures market but the futures market is found to be more sound in terms of discounting new information than the spot market. The results of Granger causality suggest that bi-directional causality exists between spot returns and future returns of nickel in short run. Whenever zinc and pepper future returns, Granger causes spot returns but not the other way round. Moreover, whenever Soybean spot returns, Granger causes future returns in the short run.
 
KEYWORD
Co- integration Test, Commodity Market, Granger causality, Market Efficiency, Multi Commodity Exchange, VECM Futures Markets.
Copyright@2012.mewaruniversity.in