An empirical examination of the efficiency of commodity markets in India

Ullas Rao, Vincent Charles

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Abstract

In this paper, we examine the efficiency of commodity markets in India by resorting to a rigorous econometric model, namely the cost-of-carry model. By underscoring the need to establish a relationship between the futures and spot markets (given that they depict a time-series behaviour), the proposed model is better positioned to perform the empirical examination of market efficiency when compared to alternative models (such as the variance-ratio test, Jarque-Bera test, and runs test, among others) that have traditionally relied upon the observed behaviour of spot prices alone to achieve the set objective. A review of the existing literature points towards a lack of studies that use statistically robust models, such as cointegration regression, to assess the efficiency of commodity markets in emerging economies. This is particularly true for India, where prices of commodities with their associated impact on inflation always posit a politically sensitive scenario.
Original languageEnglish
Pages (from-to)1-15
Number of pages15
JournalInternational Journal of Banking, Accounting and Finance
Volume12
Issue number1
Early online date15 Dec 2020
DOIs
Publication statusPublished - 2021

Keywords

  • Cointegration regression
  • Commodity markets
  • Cost-of-carry
  • India
  • Market efficiency

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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