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Efficiency of Wheat Futures across APMC Mandis

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  • Rahul Kumar Singh

    (Indian Institute of Technology)

Abstract

Commodity futures markets are known for their price discovery and risk management functions. If the futures market is reliable, these functions could work as potential solutions to the current perils of Indian agriculture. The paper examines the reliability of the wheat futures market based on results of the Cointegration test, Vector Error Correction Model (VECM) and Information Share (IS) measures. Previous research in this field has been limited to studying one wheat spot market with the futures market. In this study, Agricultural Produce Marketing Committee (APMC) mandis are considered to be the regional spot markets. Price series of seven APMC mandis corresponding to seven different states of India are studied, along with four wheat futures contracts. Cointegration results show that the futures market is efficient except for the case of the Haryana APMC mandi. VECM results show that futures market leads the APMC mandis except for two cases out of 28. According to IS measures, the futures market dominates the spot markets in the price discovery process except for the Haryana APMC mandi. Overall, the results imply that the futures market is reliable, and government must not hurt it with frequent bans.

Suggested Citation

  • Rahul Kumar Singh, 2023. "Efficiency of Wheat Futures across APMC Mandis," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 21(3), pages 681-701, September.
    • Handle: RePEc:spr:jqecon:v:21:y:2023:i:3:d:10.1007_s40953-023-00348-9
    DOI: 10.1007/s40953-023-00348-9
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    More about this item

    Keywords

    Price discovery; Wheat futures; Cointegration; Market efficiency; Information share;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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