Efficiency of Indian Commodities Market- A study of Agricultural Commodities

Abstract

The aim of this paper is to investigate the market efficiency of Indian agricultural commodities - pepper and soybean on National Commodities & Derivatives Exchange (NCDEX) using Johansen's co-integration test, VECM and granger causality test. The analysis used daily data on spot prices and near month futures prices of two agricultural commodities over the period from April 2008 to April 2013 which is obtained from NCDEX website. The study concludes that both the series of spot and futures prices are co-integrated of order one and exhibit a stable long-run equilibrium relationship. The results of VECM show that there is a bi-directional causality in spot and futures market, but the futures market is found to be more sound in terms of discounting new infom1ation than the spot market.