Price Discovery and Volatility Spillover: Evidence from Indian Commodity Markets

The International Journal of Business and Finance Research, v. 7 (3) p. 57-75

20 Pages Posted: 29 Jan 2013

See all articles by Sanjay Sehgal

Sanjay Sehgal

University of Delhi - Department of Financial Studies

Namita Rajput

University of Delhi

Florent Deisting

ESC PAU

Date Written: 2013

Abstract

This paper examines the price discovery and volatility spill-over relationship for Indian commodity markets. We cover twelve actively traded commodities including agriculture, metal and energy and four commodity indices. Price discovery is confirmed for eight commodities and three indices with a greater role for futures markets in the price discovery process. Price discovery results are encouraging given the nascent character of commodity markets in India. However the market does not seem to be competitive. Volatility spill-over is confirmed for only three commodities and none of the indices. This implies the Indian Commodity Market is yet to evolve an efficient risk transfer system for most commodities. The findings have implications for policy makers, hedgers and investors. The research contributes to alternative investment literature for emerging markets such as India.

Keywords: Price discovery, Granger Causality, VECM, EGARCH, Volatility, Spillover

JEL Classification: G13, G14, G15, G18, C32

Suggested Citation

Sehgal, Sanjay and Rajput, Namita and Deisting, Florent, Price Discovery and Volatility Spillover: Evidence from Indian Commodity Markets (2013). The International Journal of Business and Finance Research, v. 7 (3) p. 57-75, Available at SSRN: https://ssrn.com/abstract=2149790

Sanjay Sehgal (Contact Author)

University of Delhi - Department of Financial Studies ( email )

University Road
Delhi, 110 007
India

Namita Rajput

University of Delhi ( email )

University Road
Kirti Nagar
Delhi, DE New Delhi 110 007
India

Florent Deisting

ESC PAU ( email )

3, r St John Perse
Pau, 64000
France

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