IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2020-06-14.html
   My bibliography  Save this article

Evidences on Price Discovery in BRICS

Author

Listed:
  • Prashant Sharma

    (IIHMR University, Jaipur, Rajasthan, India,)

  • Geetika Arora

    (School of Management, GD Goenka University, Gurugram, Haryana, India,)

  • Prashant Gupta

    (Indian Institute of Management, Trichy, Tamil Nadu, India)

Abstract

The present study tries to assess the price discovery process in BRICS economies. The price discovery is tested by assessing the long run and short run causality between the future and spot market indices of BRICS economies. The study employs daily closing prices of spot and future indices of BRICS economies. After testing the stationarity and order of integration of spot and future market series, the study employs Johansen co-integration test to assess the long run co-integrating relationship between the two markets. The long run causality is tested using error correction mechanism and Wald test is used to assess the short run causality. The results of the study suggest that the price discovery process is taking place in case of Russia and China in long run. The short run causality exists between future and spot market in case of Brazil and Russia.

Suggested Citation

  • Prashant Sharma & Geetika Arora & Prashant Gupta, 2020. "Evidences on Price Discovery in BRICS," International Journal of Economics and Financial Issues, Econjournals, vol. 10(6), pages 99-105.
    • Handle: RePEc:eco:journ1:2020-06-14
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijefi/article/download/10238/pdf
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijefi/article/view/10238/pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Cornell, Bradford & French, Kenneth R, 1983. "Taxes and the Pricing of Stock Index Futures," Journal of Finance, American Finance Association, vol. 38(3), pages 675-694, June.
    2. Atchison, Michael D & Butler, Kirt C & Simonds, Richard R, 1987. "Nonsynchronous Security Trading and Market Index Autocorrelation," Journal of Finance, American Finance Association, vol. 42(1), pages 111-118, March.
    3. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    4. Bekiros, Stelios D. & Diks, Cees G.H., 2008. "The relationship between crude oil spot and futures prices: Cointegration, linear and nonlinear causality," Energy Economics, Elsevier, vol. 30(5), pages 2673-2685, September.
    5. Bradford Cornell & Kenneth R. French, 1983. "The pricing of stock index futures," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 3(1), pages 1-14, March.
    6. Chan, Kalok, 1992. "A Further Analysis of the Lead-Lag Relationship between the Cash Market and Stock Index Futures Market," The Review of Financial Studies, Society for Financial Studies, vol. 5(1), pages 123-152.
    7. Black, Fischer, 1976. "The pricing of commodity contracts," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 167-179.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Prashant Sharma & Gaurav Agrawal & Geetika Arora & Dinesh Kumar Sharma & Varun Chotia, 2023. "Research on Price Discovery in Financial Securities: Trends and Directions for Future Research," JRFM, MDPI, vol. 16(9), pages 1-19, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jianqiang Hu & Tianxiang Wang & Wenwei Hu & Jun Tong, 2020. "The impact of trading restrictions and margin requirements on stock index futures," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(7), pages 1176-1191, July.
    2. Kim, Bong-Han & Chun, Sun-Eae & Min, Hong-Ghi, 2010. "Nonlinear dynamics in arbitrage of the S&P 500 index and futures: A threshold error-correction model," Economic Modelling, Elsevier, vol. 27(2), pages 566-573, March.
    3. Magkonis, Georgios & Tsouknidis, Dimitris A., 2017. "Dynamic spillover effects across petroleum spot and futures volatilities, trading volume and open interest," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 104-118.
    4. Prashant Sharma & Prashant Gupta & Dinesh Kumar Sharma & Gaurav Agarwal, 2022. "Investigating the Efficiency of Bitcoin Futures in Price Discovery," International Journal of Economics and Financial Issues, Econjournals, vol. 12(3), pages 104-109, May.
    5. Jieye Qin & Christopher J. Green & Kavita Sirichand, 2019. "Determinants of Nikkei futures mispricing in international markets: Dividend clustering, currency risk, and transaction costs," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(10), pages 1269-1300, October.
    6. Bühler, Wolfgang & Kempf, Alexander, 1994. "DAX Index Futures: Mispricing and Arbitrage in German Markets," ZEW Discussion Papers 94-15, ZEW - Leibniz Centre for European Economic Research.
    7. Xu, Xiaojie, 2014. "Price Discovery in U.S. Corn Cash and Futures Markets: The Role of Cash Market Selection," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169809, Agricultural and Applied Economics Association.
    8. Xiaojie Xu, 2019. "Contemporaneous Causal Orderings of CSI300 and Futures Prices through Directed Acyclic Graphs," Economics Bulletin, AccessEcon, vol. 39(3), pages 2052-2077.
    9. Chen, Chin-Ho, 2019. "Downside jump risk and the levels of futures-cash basis," Pacific-Basin Finance Journal, Elsevier, vol. 57(C).
    10. Chou-Wen Wang & Ting-Yi Wu, 2010. "Futures and futures options with basis risk: theoretical and empirical perspectives," Quantitative Finance, Taylor & Francis Journals, vol. 11(3), pages 477-485.
    11. Chiarella, Carl & Kang, Boda & Nikitopoulos, Christina Sklibosios & Tô, Thuy-Duong, 2013. "Humps in the volatility structure of the crude oil futures market: New evidence," Energy Economics, Elsevier, vol. 40(C), pages 989-1000.
    12. Martin T. Bohl & Alexander Pütz & Pierre L. Siklos & Christoph Sulewski, 2018. "Information Transmission under Increasing Political Tension – Evidence for the Berlin Produce Exchange 1887-1896," CQE Working Papers 7618, Center for Quantitative Economics (CQE), University of Muenster.
    13. Jimmy E. Hilliard & Haoran Zhang, 2020. "The impact of soft intervention on the Chinese financial futures market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(3), pages 374-391, March.
    14. Xue, Jian & Guo, Na & Zhao, Laijun & Zhu, Di & Ji, Xiaoqin, 2020. "A cooperative inter-provincial model for energy conservation based on futures trading," Energy, Elsevier, vol. 212(C).
    15. Alexander Zeitlberger & Alexander Brauneis, 2016. "Modeling carbon spot and futures price returns with GARCH and Markov switching GARCH models," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 24(1), pages 149-176, March.
    16. Philipp Adämmer & Martin T. Bohl, 2018. "Price discovery dynamics in European agricultural markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(5), pages 549-562, May.
    17. Hakan Er & Adnan Hushmat, 2017. "The application of technical trading rules developed from spot market prices on futures market prices using CAPM," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 7(3), pages 313-353, December.
    18. Angelopoulos, Jason & Sahoo, Satya & Visvikis, Ilias D., 2020. "Commodity and transportation economic market interactions revisited: New evidence from a dynamic factor model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 133(C).
    19. Manolis G. Kavussanos & Ilias D. Visvikis & Panayotis D. Alexakis, 2008. "The Lead‐Lag Relationship Between Cash and Stock Index Futures in a New Market," European Financial Management, European Financial Management Association, vol. 14(5), pages 1007-1025, November.
    20. Lin Shinn-Juh & Stevenson Maxwell, 2001. "Wavelet Analysis of the Cost-of-Carry Model," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 5(1), pages 1-17, April.

    More about this item

    Keywords

    Price discovery; Johansen co-integration; Error correction mechanism; BRICS;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2020-06-14. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.