Role of futures market in price discovery

被引:0
|
作者
Sunita Arora
Narender Kumar
机构
[1] Government College for Women,Department of Commerce
[2] Maharshi Dayanand University,Department of Commerce
关键词
Futures market; Commodity markets; Cointegration; Price discovery; Error correction;
D O I
10.1007/s40622-013-0019-8
中图分类号
学科分类号
摘要
This study analyses the price discovery aspect of futures markets. Data on spot prices and near month futures prices of two non-precious metals, one highly traded, i.e. copper and other lowly traded, i.e. aluminium, on Multi Commodity Exchange of India Limited from January 2006 to December 2011 is analysed. Vector Error Correction Model (VECM) based on cointegration technique is applied. The study concludes that both the series of spot and futures prices are cointegrated 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 information than the spot market.
引用
收藏
页码:165 / 179
页数:14
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