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Market Efficiency of Commodity Derivatives with Reference to Nonagricultural Commodities

Market Efficiency of Commodity Derivatives with Reference to Nonagricultural Commodities The main objective of this paper is to study the market efficiency of nonagricultural commodities markets. Based on the review of literature, the present study tries to find out whether there is a cointegration, lead and lag relation in spot and futures market prices of identified non agricultural commodities traded in multi commodities exchange, using Stationary tests Cointegration and Regression Model which explains Casual relationship between Spot and Futures Markets. The study find that futures prices cause spot prices and vice versa and suggests that no profitable arbitrage exists and investor cannot book profit since new information already gets to be discounted by spot and futures prices simultaneously. The main contribution of the study is empirically identified and proves that there is a casual relationship between futures and spot which helps the investor to forecast the price with respect to Non Agricultural commodities. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asia-Pacific Financial Markets Springer Journals

Market Efficiency of Commodity Derivatives with Reference to Nonagricultural Commodities

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Publisher
Springer Journals
Copyright
Copyright © The Author(s), under exclusive licence to Springer Japan KK, part of Springer Nature 2023. Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.
ISSN
1387-2834
eISSN
1573-6946
DOI
10.1007/s10690-023-09400-3
Publisher site
See Article on Publisher Site

Abstract

The main objective of this paper is to study the market efficiency of nonagricultural commodities markets. Based on the review of literature, the present study tries to find out whether there is a cointegration, lead and lag relation in spot and futures market prices of identified non agricultural commodities traded in multi commodities exchange, using Stationary tests Cointegration and Regression Model which explains Casual relationship between Spot and Futures Markets. The study find that futures prices cause spot prices and vice versa and suggests that no profitable arbitrage exists and investor cannot book profit since new information already gets to be discounted by spot and futures prices simultaneously. The main contribution of the study is empirically identified and proves that there is a casual relationship between futures and spot which helps the investor to forecast the price with respect to Non Agricultural commodities.

Journal

Asia-Pacific Financial Markets – Springer Journals

Published: Mar 1, 2023

Keywords: Capital market; Investment decisions; Time series; Stock price; G10; G110; C580; G120

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