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Market Efficiency of Commodity Derivatives with Reference to Nonagricultural Commodities

Author

Listed:
  • Hema Divya Kantamaneni

    (Koneru Lakshmaiah Education Foundation)

  • Vasudeva Reddy Asi

    (Koneru Lakshmaiah Education Foundation
    Vellore Institute of Technology, Chennai)

Abstract

The main objective of this paper is to study the market efficiency of nonagricultural commodities markets. Based on the review of literature, the present study tries to find out whether there is a cointegration, lead and lag relation in spot and futures market prices of identified non agricultural commodities traded in multi commodities exchange, using Stationary tests Cointegration and Regression Model which explains Casual relationship between Spot and Futures Markets. The study find that futures prices cause spot prices and vice versa and suggests that no profitable arbitrage exists and investor cannot book profit since new information already gets to be discounted by spot and futures prices simultaneously. The main contribution of the study is empirically identified and proves that there is a casual relationship between futures and spot which helps the investor to forecast the price with respect to Non Agricultural commodities.

Suggested Citation

  • Hema Divya Kantamaneni & Vasudeva Reddy Asi, 2023. "Market Efficiency of Commodity Derivatives with Reference to Nonagricultural Commodities," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(1), pages 247-258, March.
    • Handle: RePEc:kap:apfinm:v:30:y:2023:i:1:d:10.1007_s10690-023-09400-3
    DOI: 10.1007/s10690-023-09400-3
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    References listed on IDEAS

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    More about this item

    Keywords

    Capital market; Investment decisions; Time series; Stock price;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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