The Price Discovery and Efficiency of Indian Commodity Future Market

The study investigates the performance of Multi-Commodity Exchange Futures market in terms of market efficiency and price discovery with the Johansen & Juselius (1990) co-integration model. Vector Error Correction Model has been used to expose the short-term relationship between spot and future market. The empirical results revealed that with the evidence, to support the long-run equilibrium relationships in Spot-Futures markets and the dominant role of futures in price discovery. To that extent the price formation is efficient i.e., futures markets are perfect hedge against the variations in spot-prices and the price movements in the futures market lead price formation in the spot-market. The results owes that futures market exerts a stronger influence on the spot-market and, therefore, to that extent the futures prices are able to discover prices efficiently. The empirical results thus, leads to a conclusion that the MCX futures market is matured and efficient.

Autorentext

Rahul Roy is pursuing Ph.D in Commerce at Pondicherry Central University, India. His research interest comprised of Finance and Management. He possessed Academic qualification as M. Phil (Finance), MBA (Finance), M.Com, B.Ed. (Commerce), M.A (Economics), BLIS, PGDIM, PGDDM, PGDLAN, PGDCA, PGDTS.