Market Moves

<p><strong><em>Exploring Price Dynamics in Indian Commodity Markets</em></strong></p><p><em>Understanding Long-Term and Short-Term Relationships</em></p><p>In this preface we introduce our present research work which delves into the examination of the relationship both long-term and short-term as well as the dynamics of price discovery and volatility spillover between the <strong>spot</strong> and <strong>futures commodity markets</strong> in India. Furthermore this thesis aims to detect variations in primary outcomes during distinct crisis periods namely the <strong>Global Financial Crisis (GFC)</strong> and the <strong>European Sovereign Debt Crisis (ESDC)</strong>.</p><p><strong><em>Data and Objectives</em></strong></p><p>Our study leverages daily closing price data for 12 commodities spanning various sectors covering the period from January 1 2007 to December 31 2017. The overarching objectives of this investigation encompass the examination of <strong>cointegration</strong> the elucidation of the price discovery function and the analysis of the <strong>volatility spillover effect</strong> between the Indian spot and futures commodity markets. To ensure a nuanced understanding and time-dependent results we partitioned the data into four distinct sub-periods: the <strong>GFC period</strong> from January 1 2007 to November 12 2008; the <strong>post-GFC period</strong> from November 13 2008 to April 11 2011; the <strong>ESDC period</strong> from April 12 2011 to August 31 2015; and finally the <strong>post-ESDC period</strong> spanning from September 1 2015 to December 31 2017.</p><p><strong><em>Methodology</em></strong></p><p>To achieve these objectives we employ a range of econometric tools selected based on previous scholarly literature. These tools encompass the <strong>Unit Root test</strong> including the Augmented Dickey Fuller and Phillips-Perron tests <strong>Johansen's Cointegration test</strong> <strong>Vector Error Correction Model (VECM)</strong> <strong>Vector Autoregression (VAR)</strong> <strong>Autoregressive Distributed Lag (ARDL)</strong> model <strong>Granger Causality test</strong> and the **Glosten-Jagannathan-Runkle Generalized Autoregressive Conditional Heteroskedasticity (GJR-GARCH) model.</p><p><strong><em>Key Findings</em></strong></p><p>Our findings reveal that in the long-term all commodities exhibit cointegration with their respective spot and futures markets with the exception of natural gas and soybean during the post-GFC period gold aluminium and lead during the ESDC period and Jeera during the post-ESDC period. This suggests that these exceptions signify efficiency between their spot and futures markets. In the short-term all commodities demonstrate cointegration with their spot and futures markets except Jeera during the GFC and post-GFC periods.</p><p><br></p>