Price Discovery in precious metals market: A study of Gold

GIS Business ◽  
2018 ◽  
Vol 13 (6) ◽  
pp. 13-20
Author(s):  
Dr. Narender Kumar ◽  
Mrs. Sunita Arora
Keyword(s):  
Granger Causality ◽  
Price Discovery ◽  
Precious Metals ◽  
Futures Market ◽  
Study Data ◽  
Futures Prices ◽  
Causality Test ◽  
Commodity Exchange ◽  
Long Time

Gold is the oldest known precious metal on this earth and for a long time it has been used as a standard currency. The present study has been undertaken with an attempt to analyze whether Indian futures market is playing its role of price discovery in case of gold or not. For the purpose of study, data for spot and futures prices for a period of four and a half years starting from June 2005 to December 2009 has been collected from the website of Multi Commodity Exchange of India Limited, India’s largest commodity exchange in terms of value of trading on commodity exchanges in India. Data has been tested for statioanrity and was found non stationary. It was then transformed to make it stationary. On the basis of Johansen’s cointegration test, series of spot and futures prices were found cointgrated. Granger Causality test was applied on stationary data. The results of the study show that futures market in India is performing its role of price discovery in case of Gold. Keywords: Price Discovery, Commodity Market, Granger Causality, Cointegration.

An investigation of price discovery and volatility spillovers in India’s foreign exchange market

2015 ◽  
Vol 42 (2) ◽  
pp. 261-284 ◽  
Author(s):  
Sanjay Sehgal ◽  
Wasim Ahmad ◽  
Florent Deisting
Keyword(s):  
Price Discovery ◽  
Stock Exchange ◽  
Futures Market ◽  
Volatility Spillover ◽  
Futures Prices ◽  
Content Type ◽  
Volatility Spillovers ◽  
Currency Market ◽  
Short Run

Purpose – The purpose of this paper is to examine the price discovery and volatility spillovers in spot and futures prices of four currencies (namely, USD/INR, EURO/INR, GBP/INR and JPY/INR) and between futures prices of both stock exchanges namely, Multi-Commodity Stock Exchange (MCX-SX) and National Stock Exchange (NSE) in India. Design/methodology/approach – The study applies cointegration test of Johansen’s along with VECM to investigate the price discovery. GARCH-BEKK model is used to examine the volatility spillover between spot and futures and between futures prices. The other two models namely, constant conditional correlation and dynamic conditional correlation are used to demonstrate the constant and time-varying correlations. In order to confirm the volatility spillover results, the study also applies test of directional spillovers suggested by Diebold and Yilmaz (2009, 2012). Findings – The results of the study show that there is long-term equilibrium relationship between spot and futures and between futures markets. Between futures and spot prices, futures price appears to lead the spot price in the short-run. Volatility spillover results indicate that the movement of volatility spillover takes place from futures to spot in the short-run while spot to futures found in the long-run. However, the results of between futures markets exhibit the dominance of MCX-SX over NSE in terms of volatility spillovers. By and large, the findings of the study indicate the important role of futures market in price discovery as well as volatility spillovers in India’s currency market. Practical implications – The results highlight the role of futures market in the information transmission process as it appears to assimilate new information quicker than spot market. Hence, policymakers in emerging markets such as India should focus on the development of necessary institutional and fiscal architecture, as well as regulatory reforms, so that the currency market trading platforms can achieve greater liquidity and efficiency. Originality/value – Due to recent development of currency futures market, there is dearth of literature on this subject. With the apparent importance of currency market in recent time, this study attempts to study the efficient behavior of currency market by way of examining the price discovery and volatility spillovers between spot and futures and between futures prices of four currencies traded on two platforms. The study has strong implications for India’s stock market especially at the time when its currency is under great strain owing to the adverse impact of global financial crisis.

scholarly journals Relationship Between Spot Prices and Futures Prices: Evidence From Karachi Stock Exchange

2021 ◽  
Vol 5 (2) ◽  
pp. 109-123
Author(s):  
Muhammad Asif Ali ◽  
Muhammad Asif Ali ◽  
Dr. Naveed Hussain Shah
Keyword(s):  
Granger Causality ◽  
Stock Exchange ◽  
Granger Causality Test ◽  
Spot Market ◽  
Futures Market ◽  
Futures Prices ◽  
Causality Test ◽  
Spot Prices ◽  
Unit Root Testing ◽  
Integration Test

This study investigates the relationship between futures prices and their underlying spot prices of the stocks trading on Pakistan stock market. Data on the monthly closing prices of future contracts and their underlying stocks of 30 companies for the period January 2004 to June 2014 have been taken for analysis. Descriptive statistics, Augmented Dicky Fuller test for unit root testing, Johnson Co-integration test, Granger causality test and Vector Error Correction Model are used. The results confirms significant long term relationship between futures prices and the associated Spot prices in case of 26 companies. The report of Granger causality test indicates that a Bi-directional causality lack to exist in case of each security, VECM shows that Spot prices for current month are effected by previous month prices in case of 7 companies, while futures prices of current month are affected by previous month prices in case of 4 companies. VECM illustrates that the volatility shocks in spot market are less effected by futures market, however the volatility shocks in corresponding futures market were strongly and significantly affected by spot market volatility.

scholarly journals KAUSALITAS ANTARA FUNDAMENTAL EKONOMI DAERAH DAN PERAN WANITA DALAM PEMBANGUNAN

2012 ◽  
Vol 13 (1) ◽  
pp. 46
Author(s):  
Amin Pujiati
Keyword(s):  
Granger Causality ◽  
Point Of View ◽  
Reciprocal Relationship ◽  
Causality Test ◽  
Women In Development ◽  
Economic Fundamentals ◽  
Central Java ◽  
Role Of Women ◽  
Women's Role

This study aims to analyze the role of women in development and the causality between regional economic fundamentals and the role of women at Central Java. It uses district level data and supplied by the Indonesian Central Bureau of Statistics during 2001- 2009. The tools of analysis Granger Causality Test. The results of the analysis of the role of women in development is still low, from education, health, women's role and potential of public sector point of view. The Granger Causality tests results shows that a direct relationship between women's role in regional development with economic fundamentals, that also the role of women in development increased, causing increased local economic fundamentals. In this study there is no reciprocal relationship between economic fundamentals and the role of women.

Does Ban on Futures trading (de)stabilise spot volatility?

2019 ◽  
Vol 9 (2) ◽  
pp. 145-166 ◽  
Author(s):  
Neharika Sobti
Keyword(s):  
Granger Causality ◽  
Price Discovery ◽  
Futures Trading ◽  
Causality Test ◽  
Content Type ◽  
Long Run ◽  
Short Run ◽  
The Impact ◽  
Spot Volatility ◽  
Non Parametric

Purpose The purpose of this paper is to ascertain the possible consequences of ban on futures trading of agriculture commodities in India by examining three critical issues: first, the author explores whether price discovery dominance changes between futures and spot in the pre-ban and post-relaunch phase both in the long run and short run. Second, the author examines the impact of ban and relaunch of futures trading on its underlying spot volatility for five sample cases of agriculture commodities (Wheat, Sugar, Soya Refined Oil, Rubber and Chana) using both parametric and non-parametric tests. Third, the author revisits the destabilization hypothesis in the light of ban on futures trading by examining the impact of unexpected component of liquidity of futures on spot volatility. Design/methodology/approach The author uses widely adopted methodology of co-integration to examine long-run relationship between spot and futures, while the short-run relationship is investigated using vector error correction model (VECM) and Granger causality to test price discovery in the pre-ban and post-relaunch phases. The second objective is explored using a combination of parametric and non-parametric tests such as Welch one-way ANOVA and Kruskal–Wallis test, respectively, to gauge the impact of ban on futures trading on spot volatility along with post hoc tests to investigate pairwise comparison of spot volatility among three phases (pre-ban, ban and post-relaunch) using Dunn Test. In addition, extensive robustness test is undertaken by adopting augmented E-GARCH model to ascertain the impact of ban and relaunch of futures trading on spot volatility. The third objective is investigated using Granger causality test between spot volatility and unexpected component of liquidity of futures estimated using Hodrick and Prescott (HP) filter to re-visit the destabilization hypothesis. Findings The author found extensive evidence for the dominance of futures market in the price discovery of agriculture commodities both in the pre-ban and post-relaunch phases in India. The ban on futures trading is found to have a destabilizing impact on spot volatility as evident from the findings of Wheat, Sugar and Rubber. In addition, it is observed that spot volatility was highest during the ban phase as compared to the pre-ban and post-relaunch phases for all four commodities barring Chana. The author found that destabilisation hypothesis holds true during the pre ban phase, while weakening of destabilization hypothesis is observed in the post-relaunch phase as unexpected futures liquidity has no role in driving the spot volatility. Originality/value This study is a novel attempt to empirically examine the potential impact of ban and relaunch of futures trading of agriculture commodities on two key market quality dimensions – price discovery and spot volatility. In addition, destabilization hypothesis is revisited to investigate the impact of futures trading on spot volatility during the pre-ban and post-relaunch period.

scholarly journals When The Last Tree Dies, The Last Man Dies: Do Forests Hold The Key To Survival In Ghana? A Critical Analysis Using The Bootstrapped Rolling Window Granger Causality Test Approach

2022 ◽  
Author(s):  
Michael Kaku Minlah ◽  
Xibao Zhang ◽  
Philipine Nelly Ganyoh ◽  
Ayesha Bibi
Keyword(s):  
Life Expectancy ◽  
Causal Relationship ◽  
Granger Causality ◽  
Human Life ◽  
Granger Causality Test ◽  
Causality Test ◽  
Vector Borne Diseases ◽  
Long Run ◽  
Rolling Window

Abstract This paper investigates the role of forests in the life expectancy of people in Ghana. We test whether the extinction of forests will inevitably lead to extinction of people in Ghana. We first examined the causal relationship between life expectancy and deforestation using the full sample bootstrap Granger causality test approach and find causality to run from deforestation to life expectancy with no feedback from life expectancy to deforestation. Testing for parameter stability, we found the short run and long run parameters of the estimated Vector Auto Regressive models to be unstable. A time-varying approach, the rolling window bootstrapped Granger causality test was then employed to investigate the causal relationship between life expectancy and deforestation. The results showed that deforestation has a negative effect on life expectancy, confirming the widely accepted saying that the health of forests is inextricably linked to the health of mankind. The empirical results further show that, on trend higher life expectancy increases the rate of deforestation in Ghana. Highlighting the importance of the role of forests in influencing life expectancy in Ghana, we recommend awareness creation on the role of forests in supporting human life and also extensive afforestation programs to reduce the rate of deforestation in Ghana. This, we believe, will reduce the spread of vector borne diseases such as malaria and reduce the surge in respiratory diseases which shorten the life span of Ghanaians.JEL codesQ23, Q50, Q53, Q58, Q58

scholarly journals Criticality, Depth and Voice in Academic Writing

2016 ◽  
Vol 30 (2) ◽  
pp. 95-104
Author(s):  
Madhu Neupane Bastola
Keyword(s):  
Second Language Acquisition ◽  
Academic Writing ◽  
Research Question ◽  
Study Data ◽  
Ethnographic Study ◽  
Secondary Sources ◽  
Long Time ◽  
Basic Characteristics ◽  
The University

Academic writing plays a crucial role in academic as well as professional life of learners. Developing academic writing takes long time and efforts. Though there are multiple factors that play the role of enablers or disablers for success in academic writing, awareness of basic characteristics of academic writing is a fundamental prerequisite. Similarly, the requirements of academic writing differ from culture to culture and institution to institution. Therefore, it is highly important for learners to understand the expectations of academic writing in their institutions. This article describes an ethnographic study that was conducted in the University of Sydney, Australia to understand a course coordinator’s expectation regarding criticality, depth and voice in academic writing. To answer the research question raised in the study, data were collected from published and unpublished secondary sources, an interview coordinator of the of course Second Language Acquisition (SLA) and an assignment in SLA. The thematic analysis of data revealed that criticality, depth and voice are important characteristics of academic writing. Different ways to meet the expectation of criticality, depth and voice are discussed and some suggestions for further research are forwarded based on the discussion.

Effectiveness of Currency Futures Market in India: An Empirical Investigation

2017 ◽  
Vol 6 (2) ◽  
pp. 196-203 ◽  
Author(s):  
T. K. Dhaneesh Kumar ◽  
B. G. Poornima ◽  
P. K. Sudarsan
Keyword(s):  
Granger Causality ◽  
Garch Model ◽  
Granger Causality Test ◽  
Futures Market ◽  
Marginal Effect ◽  
Model Framework ◽  
Causality Test ◽  
Currency Futures ◽  
Before And After ◽  
Spot Volatility

This article investigates the role of currency futures market in India in the context of high volatility of Indian rupee (INR) in recent years. It examines whether the spot volatility before and after the introduction of currency futures were significantly different. It also examines the volatility causation between currency spot and futures market in India. The study considers three international currencies, namely US dollar (USD), British pound (GBP) and Euro in relation to INR for the period of 2006–2013. It made use of GARCH model framework and Granger causality test. The GARCH model results indicate that after the introduction of futures, there is less volatility for GBP and Euro but not in the case of USD. The Granger causality test reveals that USD and Euro has unidirectional causality, which means that spot causes future fluctuations, while in the case of GBP, there is bidirectional causality. The study concludes that the introduction of futures is not effective in reducing spot volatility for INR–USD but there is a marginal effect for INR–GBP and INR–Euro.

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.

An Empirical Analysis of Market Efficiency and Price Discovery in Indian Commodity Market

2018 ◽  
Vol 19 (3) ◽  
pp. 771-789 ◽  
Author(s):  
Shashi Gupta ◽  
Himanshu Choudhary ◽  
D. R. Agarwal
Keyword(s):  
Error Correction ◽  
Market Efficiency ◽  
Price Discovery ◽  
Correction Term ◽  
Futures Market ◽  
Commodity Futures ◽  
Spot Price ◽  
Futures Prices ◽  
Short Term ◽  
Important Indicator

The present article is an attempt to empirically investigate the long-term market efficiency and price discovery in Indian commodity futures market. The study has been conducted with eight commodities which include two agricultural commodities, two industrial commodities, two precious metal and two energy commodities. Sophisticated statistical methods like restricted cointegration and vector error correction model (VECM) are used to analyse the spot and futures prices time series. Restricted cointegration test shows that near-month futures prices for all the commodities are cointegrated with the spot prices but futures prices of all the commodities are inefficient to predict the future spot price. Indian commodity futures market evidenced as the thinly traded market (Kumar & Pandey, 2013, Journal of Indian Business Research, 5(2), 101–121) rejects the null hypothesis of efficiency and unbiasedness for all the eight commodities which reconfirms the result of Fortenbery and Zapata (1997, Journal of Futures Markets, 17(3), 279–301). The presence of short-term biases in the Indian futures market is evidenced in the results of VECM model which indicates the presence of informational efficiency. The statistically significant value of past prices of spot and futures confirm the short-term inefficiency and biasedness. The significant value of error correction term (ECT) of futures prices suggests that commodity futures are the most important indicator of commodity price movements. The important implication of the results is for market traders. They can use the futures prices to discover the new equilibrium and earn profits by transmitting it to the spot market. The better understanding of the interconnectedness of these market would be useful for policymakers who try to establish stability in the financial markets.

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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