Futures and Spot Price Relations: A Case Study of Castor NCDEX Market in India Bansal Rachana Kumari*, Zala Y.C.** Department of Agricultural Economics, B.A. College of Agriculture, Anand Agricultural University, Anand-388110, Gujarat, India *Corresponding author: rachi.bansal22@gmail.com
** yczala@yahoo.co.in
Online published on 3 December, 2015. Abstract This study has analyzed the futures and spot price relations in castor and the data were collected from NCDEX for a period of 10 years i.e. July, 2004 to December, 2013. The results revealed that volume of castor traded in NCDEX has increased during the recent times indicating the increasing information flow into the markets. Analysis of price volatility has revealed its persistence in spot and futures prices as the sum of the coefficient of ARCH (á) and GARCH (â) were estimated closer to one. The ADF (Augmented Dickey Fuller) test has been used to check the stationarity of the time series data and it follows the stationarity pattern at the first difference. The spot and futures prices were found to be co-integrated assessed through Johansen Co-integration test. The result of Granger test detects unidirectional Granger Causality from futures to spot markets, which indicates its better hedging efficiency for farmers and exporters to mitigate the price risk. This study broadly inferred that futures were efficient in their price discovery process. Top Keywords ADF test, co-integration, futures trading, granger causality, hedging, stationarity. Top |