Title: Market efficiency and information content of Indian commodity futures markets

Authors: Vikas Pandey; Vipul

Addresses: Indian Institute of Management, Lucknow, Near Sitapur Road, Lucknow, 226013, India ' Indian Institute of Management, Lucknow, Near Sitapur Road, Lucknow, 226013, India

Abstract: This article examines the efficiency of pricing of eight commodity futures traded at Multi Commodity Exchange (MCX) and National Commodity & Derivative Exchange (NCDEX) of India. We find that the current futures prices and the expiration-day spot prices are generally cointegrated, and exhibit market efficiency. We also find evidence of predictive content in the futures prices for the future spot prices. This content varies among different commodities, and is more significant for the natural gas and agricultural commodities, which have higher storage and transportation costs. The risk premium is absent in the futures prices of most of our commodities, excepting two agricultural commodities and nickel.

Keywords: commodity futures; India; predictive content; risk premium; market efficiency; information content; futures prices; expiration-day spot prices; natural gas; agriculture; agricultural commodities; nickel.

DOI: 10.1504/IJICBM.2017.083232

International Journal of Indian Culture and Business Management, 2017 Vol.14 No.3, pp.274 - 293

Received: 15 Jan 2016
Accepted: 30 Apr 2016
Published online: 22 Mar 2017 *

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