scholarly journals The interdependence of coffee futures and spot markets - An econometric analysis

2021 ◽  
pp. 56-66
Author(s):  
B.N. Pradeepa Babu ◽  
Arun Muniyappa
Keyword(s):  
New York ◽  
Futures Markets ◽  
Spot Markets ◽  
Futures Prices ◽  
Spot Prices ◽  
Robusta Coffee ◽  
Indian Context ◽  
Long Run ◽  
Short Run ◽  
Producer Prices

Coffee is an export-oriented commodity for producing countries, and it is actively traded at international commodity exchange platforms viz., Intercontinental Exchange (ICE), New York and ICE, Europe. This study examines the interdependence of futures and spot markets for coffee in the price discovery mechanism, particularly in the Indian context. The study has considered both the International Coffee Organization (ICO) indicator prices and producers’ prices in India’s spot prices. The study confirms the existence of a stable long-run relationship between ICE coffee futures and ICO spot prices, implying that both prices react to the same set of market information. While there is an indication of equilibrium or long-run relationship between ICE Coffee futures (New York) and Arabica producer prices (at farm gate level) in India, the same was not true for Robusta coffee. The absence of co-integration between ICE futures prices (London) and Robusta producer prices in India suggested only a short-run relationship between them. The findings of the study conclude with strong evidence that the farm gate prices in India have been caused by the ICE futures markets, declining the contrary.

Do Changes in Natural Gas Futures Prices Influence Changes in Natural Gas Spot Prices?

1993 ◽  
Vol 11 (5) ◽  
pp. 467-472 ◽  
Author(s):  
John H. Herbert
Keyword(s):  
Natural Gas ◽  
Futures Markets ◽  
Spot Market ◽  
Spot Markets ◽  
Futures Prices ◽  
Market Prices ◽  
Spot Prices ◽  
Futures Contract

Data on natural gas futures and spot markets are examined to determine if variability in price on futures markets influences variability in price on spot markets. Using econometric techniques, it is found that changes in futures contract prices do not precede changes in spot market prices.

Measuring volatility spillovers and asymmetric responses of Agri commodity prices: evidence from spices and rubber futures in India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Saji Thazhugal Govindan Nair
Keyword(s):  
Futures Markets ◽  
Commodity Prices ◽  
Futures Contracts ◽  
Spot Markets ◽  
Content Type ◽  
Volatility Spillovers ◽  
Price Series ◽  
Long Run ◽  
Short Run ◽  
Asymmetric Responses

Purpose This paper aims to investigate price responses and volatility spillovers between commodity spot and futures markets. The study ultimately seeks the evidence-based claims on the efficiency of the long run and short run horizontal price transmissions from futures markets to spot markets. Design/methodology/approach This study used the most recent daily price series of pepper, cardamom and rubber, during the period 2004–2019, use “cointegration-ECM-GARCH framework” and verify the persisting validity of the “expectancy theory” of commodity futures pricing. Findings The results offer overwhelming evidence of futures market dominance in the price discoveries and volatility spillovers in spot markets. However, this paper finds asymmetric responses between cash and futures prices across markets. The hedging efficiency of futures contracts is commodities specific’ where spices futures are more efficient than the rubber futures. Practical implications The study passes on vital information to the producers and traders of spices and rubber who have a potential interest in the use of futures contracts to make profits from arbitrage between futures and cash markets. Originality/value The paper is unique in terms of understanding asymmetric price linkages in markets for plantation crops.

Relationship between Coffee Prices in Spot and Futures Markets-An Empirical Analysis

2020 ◽  
pp. 180-188
Keyword(s):  
New York ◽  
Correlation Coefficients ◽  
Strong Relationship ◽  
Futures Market ◽  
Regression Coefficients ◽  
Futures Prices ◽  
Market Prices ◽  
Spot Prices ◽  
Correlation And Regression Analysis ◽  
Highly Correlated

The present study explored the relationship between spot and futures coffee prices. The Correlation and Regression analysis were carried out based on monthly observations of International Coffee Organization (ICO) indicator prices of the four groups (Colombian Milds, Other Milds, Brazilian Naturals, and Robustas) representing Spot markets and the averages of 2nd and 3rd positions of the Intercontinental Exchange (ICE) New York for Arabica and ICE Europe for Robusta representing the Futures market for the period 1990 to 2019. The study also used the monthly average prices paid to coffee growers in India from 1990 to 2019. The estimated correlation coefficients indicated both the Futures prices and Spot prices of coffee are highly correlated. Further, estimated regression coefficients revealed a very strong relationship between Futures prices and Spot prices for all four ICO group indicator prices. Hence, the ICE New York (Arabica) and ICE Europe (Robusta) coffee futures prices are very closely related to Spot prices. The estimated regression coefficients between Futures prices and the price paid to coffee growers in India confirmed the positive relationship, but the dispersion of more prices over the trend line indicates a lesser degree of correlation between the price paid to growers at India and Futures market prices during the study period.

Rupee-Dollar Exchange Rate and Macroeconomic Fundamentals: An Empirical Analysis Using Flexible-Price Monetary Model

2011 ◽  
Vol 12 (2) ◽  
pp. 88-105
Author(s):  
C S Shylajan ◽  
Sreejesh S ◽  
Suresh K G
Keyword(s):  
Exchange Rate ◽  
Monetary Model ◽  
Macroeconomic Variables ◽  
Indian Context ◽  
Long Run ◽  
Macroeconomic Fundamentals ◽  
Short Run ◽  
Us Dollar ◽  
Casual Relationship ◽  
Test Result

This paper empirically investigates the link between Indian rupee-US dollar exchange rates and a set of macroeconomic fundamentals using flexible-price monetary model (FPMM) for the period 1996 M1 to 2010 M12. The Johanson-Juselius cointegration test result indicates the existence of long run relationship between exchange rate and the macroeconomic variables, implying the validity of FPMM model in Indian context even though there is no short run casual relationship exist in the VECM analysis.

scholarly journals Growth And Oil Futures Prices In Developing Countries

2011 ◽  
Vol 6 (8) ◽  
Author(s):  
Salah Abosedra ◽  
Sajal Ghosh
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Economic Activity ◽  
Futures Markets ◽  
Oil Prices ◽  
The Philippines ◽  
Spot Price ◽  
Futures Prices ◽  
Oil Futures ◽  
Short Run

This paper examines cointegration and causality between oil prices and economic growth for the oil importing developing countries of Turkey, India, Pakistan, The Philippines and Korea. The study finds the absence of cointegrating relationship between oil prices and economic activity but the existence of unidirectional short-run causality running from oil prices to economic growths for The Philippines and Pakistan. Unidirectional causality is also found to exist from six and nine month futures prices to economic growth for India and Turkey in a bivariate vector autoregression framework. The study fails to establish causal relationship between oil prices and economic growth for Korea, while for India and Turkey, non-causality has been established between oil spot price and economic growth. Hence, our results may suggest that oil futures markets will have more of a role to play in the economy as these markets mature and or as oil prices continue to increase.

Simulation of Futures and Spot Markets by Using an Agent-Based Multi-Market Model

2011 ◽  
Vol 15 (2) ◽  
pp. 204-211 ◽  
Author(s):  
Tomoko Ohi ◽  
◽  
Yasuhiro Hashimoto ◽  
Yu Chen ◽  
Hirotada Ohashi
Keyword(s):  
Statistical Properties ◽  
Trading Strategies ◽  
Market Model ◽  
Spot Markets ◽  
Futures Prices ◽  
Trading Behavior ◽  
Noise Traders ◽  
Agent Based ◽  
Spot Prices ◽  
Tail Distribution

The agent-based multi-market model we propose simulates futures and spot markets. On the basis of trading strategies in real markets, four kinds of agents - arbitragers, hedgers, speculators, and noise traders - are included in our model. Interactions of the two markets are generated through various agent trading behavior. We also statistically analyzed futures and spot prices of the Nikkei 225 index, where we found a large positive correlation between the two prices and a fat-tail distribution of the basis. Simulations results show that, instead of the conventional single-market model, only the two-market model reproduces both statistical properties of futures prices.

Price Discovery Analysis of Oil Futures Market: A View of Interaction Effect

2012 ◽  
Vol 433-440 ◽  
pp. 4366-4376
Author(s):  
Yong Zeng ◽  
Lei Chen
Keyword(s):  
Interaction Effect ◽  
Information Transfer ◽  
Futures Markets ◽  
Price Discovery ◽  
Futures Market ◽  
Simultaneous Equation ◽  
Spot Markets ◽  
Futures Prices ◽  
Oil Futures ◽  
Arbitrage Trading

Whether oil futures market can perform price discovery function well is very important in global economics and energy markets. The interaction between oil spot and futures prices exists due to intraday information transfer and arbitrage trading. However, the traditional methods used in price discovery analysis ignore the interaction, and thus introduce the biased conclusions. This paper uses simultaneous equation analyze the interaction effect between oil spot and futures returns, estimates the model by the method of modified identification through heteroskedasticity (modified ITH) and examines price discovery function of oil futures markets. Using weekly spot and futures prices of Brent crude oil, gas oil and heating oil between Feb 12, 1999 and Jan 30, 2009, the results suggest oil futures return will affect the corresponding oil spot return. The unidirectional interaction exists. This indicates the information will transfer from futures markets to spot markets and oil futures markets have the major price discovery function. This paper also offers a new view of examining price discovery, i.e. interaction effect.

scholarly journals Futures Price and Trading Volume: Evidence From Malaysia

2020 ◽  
Author(s):  
Bakri Abdul Karim ◽  
Zulkefly Abdul Karim
Keyword(s):  
Trading Volume ◽  
Stock Index ◽  
Spot Price ◽  
Stock Index Futures ◽  
Index Futures ◽  
Spot Prices ◽  
Long Run ◽  
Causality Tests ◽  
Short Run ◽  
Futures Price

This paper examines the long- and short-run dynamic causality between the futures price and trading volume in the Malaysian equity market. The data of futures price, trading volume and spot price are in daily frequency, spanning from 2006 to 2009. By using ARDL cointegration and VECM causality tests, the findings revealed the existence of long-run relationship between futures price, volume and spot prices. In addition, there exists a short-run bidirectional causality relationship running between futures return-trading volume and futures return-spot return. Thus, the stock index futures market in Malaysia is not informational efficient.  

scholarly journals Price Discovery Mechanism in Spot and Futures Market of Agricultural Commodities: The Case of India

2018 ◽  
Vol 5 (2) ◽  
Author(s):  
Minakshi .
Keyword(s):  
Price Discovery ◽  
Emerging Market ◽  
Futures Prices ◽  
Correction Model ◽  
Vector Error Correction ◽  
Spot Prices ◽  
Vector Error ◽  
Long Run ◽  
The Relationship

There has been increasing focus by emerging market researchers, policymakers and regulators for investigating price discovery, relationship between future and physical market and accessible trading and risk management instruments for the benefit of various stakeholders and thus contributing to the development of literature. The central question of this paper is examining the role of influence of one market on the other and the role of each market segment in price discovery in the Indian context. Johansen Vector Error Correction Model (VECM) has been employed to examine the relationship between the spot and futures prices. The cointegration results do not confirm the existence of long-run relationship between spot and futures prices. It is thus, implied that futures prices unlikely serve as market expectations of subsequent spot prices of selected agri-commodities in India and do not help in price discovery process.

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