An Empirical Investigation of the Inter-Linkages Between Different Indices of Multi Commodity Exchange of India

Abstract

The present study makes an attempt to examine the inter-relationship between the movement of the independent indices of the Multi Commodity Exchange of India (MCX), viz., MCX Agri, MCX Metal and MCX Energy. To study the above relation, the monthly returns for these indices were considered for the period June 2006- March 2017. Econometric tools like Augmented Dickey-Fuller (ADF) and Kwiatkowski- Phillips-Schmidt-Shin (KPSS) test of stationarity, Johansen cointegration test, VAR with optimal lag length criteria and Toda and Yamamoto (1995) causality test were used for the purpose of the study. All the variables were found to be stochastic stationary at first difference as revealed by ADF and KPSS tests results. The VAR model was found to be stable as per AR characteristic roots. The results of the study reveal that none of the variables were cointegrated, except MCX Agri which was impacting MCX Metal. However, Toda and Yamamoto (1995) causality test results show unidirectional causality from MCX Agri to MCX Metal.