Ramesh Chander, Professor, Kurukshetra University, Kurukshetra, Haryana, India
Mehak Arora, Research Scholar, Kurukshetra University, Kurukshetra, Haryana, India

Seasonality of agriculture cause higher price volatility at varied point thus makes it a risky enterprise. Commodity futures trading facilitates price discovery and thus reduces volatility in theprice of the underlying. In the study, we have made an endeavor to scruti­ nize price discovery relationship intended for four agricultural commodities with specific reference to cereals and pulses. The findings reported in this paper mainly intended to draw attention of thought leaders for policy making and the traders (hedgers) for devising trading strategies. The conduct of research in this paper is designed in such manner as to identify whether futures prices helps to discover spot prices or vice-versa. The consequent results of the study are based on Augmented Dickey Fuller test, Granger Causality test, Johansen cointegration test and VECM. The outcome of the study conclu­ sively indicates that futures prices serve the price discovery function efficiently for spot prices.

Keywords: perception, price discovery, agri-commodity, ncdex, granger causality, VECM

Suggested citation: Chander, R. & Arora, M.(2015). Commodity futures trading and price discovery in India: an empirical investigation, Skyline Business Journal, Volume  11, No 1,pp 22-31.

Chander, R. & Arora, M.(2015). Commodity futures trading and price discovery in India: an empirical investigation, Skyline Business Journal, Volume  11, No 1,pp 22-31.