Title: Portfolio co-integration dynamics of metal and energy commodities: evidence from India

Authors: Shriram Anil Purankar; Vipul Kumar Singh

Addresses: Jaypee Business School, Jaypee Institute of Information Technology University, A-10, Sector 62, Noida 201307, India ' National Institute of Industrial Engineering (NITIE), (Under Ministry of HRD, Govt. of India), Vihar Lake, Mumbai 400087, India

Abstract: The present paper has bifocal objectives. First, the paper explores the time series dynamics of the industrial and precious metals commodities futures contract traded on the India's largest commodity exchange, Multi Commodity Exchange of India. Second, the paper focuses on the causality dynamics of industrial and precious metals. No such study has been undertaken on the Indian commodity bourses. In addition, it focuses on the existence of the long-term co-integration relationship - if any - between these specific categories of commodities. Amid sharp rises in both commodity prices and commodity investing, many commentators have wondered whether commodities nowadays move in sync with traditional asset classes like equity, gold, crude oil and Forex. The rationale behind diversification contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio. The paper tries to identify the long run relation-ship of industrial and precious metals with its traditional investment counterparts like Crude Oil prices, USDINR exchange rates, and Nifty 50 index. For same, the paper has utilised advance Granger causality and Johansen co-integration tests. Our results imply that industrial and precious metals may not able to provide the benefits of diversification all the time.

Keywords: MCX; gold; COMDEX; Nifty; USDINR exchange rates; crude oil prices; portfolio co-integration; co-integration dynamics; metal commodities; energy commodities; India; time series dynamics; commodity exchanges; commodity prices; commodity investment; diversification.

DOI: 10.1504/IJMP.2017.084951

International Journal of Management Practice, 2017 Vol.10 No.3, pp.273 - 294

Received: 23 May 2016
Accepted: 17 Nov 2016

Published online: 25 Mar 2017 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article