IES Management College And Research Centre

Agricultural Commodity Trading: Is it Destabilizing Spot Markets? (Record no. 49958)

MARC details
000 -LEADER
fixed length control field 03748nam a2200301 4500
003 - CONTROL NUMBER IDENTIFIER
control field OSt
005 - DATE AND TIME OF LATEST TRANSACTION
control field 20180620131952.0
008 - FIXED-LENGTH DATA ELEMENTS--GENERAL INFORMATION
fixed length control field 180620b ||||| |||| 00| 0 eng d
100 ## - MAIN ENTRY--PERSONAL NAME
Personal name Gupta, C. P.,
9 (RLIN) 31805
245 ## - TITLE STATEMENT
Title Agricultural Commodity Trading: Is it Destabilizing Spot Markets?
300 ## - PHYSICAL DESCRIPTION
Extent 47-57 p.
520 ## - SUMMARY, ETC.
Summary, etc The future trading has been held responsible by certain political and interest groups of enhancing speculative trading activities and causing volatility in the spot market, thereby further spiralling up inflation. This study examines the effect of future of trading activity on spot market volatility. The study first determined the Granger causal relationship between unexpected future trading volume and spot market volatility. It then examined the Granger causal relationship between unexpected open interest and spot market volatility. The spot volatility and liquidity was modelled using EGARCH and unexpected trading volume. The expected trading volume and open interest was calculated by using the 21-day moving average, and the difference between actual and expected component was treated as the unexpected trading volume and unexpected open interest. Empirical results confirm that for chickpeas (channa), cluster bean (guar seed), pepper, refined soy oil, and wheat, the future (unexpected) liquidity leads spot market volatility. The causal relationship implies that trading volume, which is a proxy for speculators and day traders, is dominant in the future market and leads volatility in the spot market. The results are in conformity with earlier empirical findings —Yang, Balyeat and Leathan (2005) and Nath and Lingareddy (2008)—that future trading destabilizes the spot market for agricultural commodities.<br/><br/>Results show that there is no causal relationship between future open interest and spot volatility for all commodities except refined soy oil and wheat. The findings imply that open interest, which is a proxy of hedging activity, is leading to volatility in spot market for refined soy oil and wheat. The results are in conformity to earlier empirical studies that there is a weak causal feedback between future unexpected open interest and volatility in spot market (Yang et al., 2005). For chickpeas (channa), the increase in volatility in the spot market increases trading activity in the future market. The findings are contrary to earlier empirical evidence (Chatrath, Ramchander, & Song, 1996; Yang et al., 2005) that increase in spot volatility reduces future trading activity. However, they are in conformity to Chen, Cuny and Haugen (1995) that increase in spot volatility increases future open interest. The results reveal that the future market has been unable to engage sufficient hedging activity. Thereby, a causal relationship exists only for future trading volume and spot volatility, and not for future open interest and spot volatility.<br/><br/>The results have major implications for policymakers, investment managers, and for researchers as well. The study contributes to literature on price discovery, spillovers, and price destabilization for Indian commodity markets.
653 ## - INDEX TERM--UNCONTROLLED
Uncontrolled term *Market volatility
Uncontrolled term Granger causality test
Uncontrolled term Liquidity (Economics)
Uncontrolled term Farm produce
Uncontrolled term Pressure groups
Uncontrolled term Chickpea
Uncontrolled term Agricultural Commodity
Uncontrolled term EGARCH
Uncontrolled term Future Trading
Uncontrolled term Open Interest Price
Uncontrolled term Destabilization Spot Volatility
700 ## - ADDED ENTRY--PERSONAL NAME
Personal name Sehgal, Sanjay
9 (RLIN) 31806
Personal name Wadhwa, Sahaj
9 (RLIN) 31807
773 0# - HOST ITEM ENTRY
Host Biblionumber 29959
Host Itemnumber 70623
Main entry heading BANDOPADHYAY, TATHAGATA
Place, publisher, and date of publication IIM AHMEDABAD
Other item identifier 5558806
Title VIKALPA:THE JOURNAL OF DECISION MAKERS
International Standard Serial Number 0256-0909
942 ## - ADDED ENTRY ELEMENTS (KOHA)
Source of classification or shelving scheme Dewey Decimal Classification
Koha item type Journal Article
Holdings
Withdrawn status Lost status Source of classification or shelving scheme Damaged status Not for loan Home library Current library Date acquired Total Checkouts Full call number Barcode Date last seen Price effective from
    Dewey Decimal Classification     Main Library Main Library 20/06/2018   Vol 43, Issue 1/ 5558806JA4 5558806JA4 20/06/2018 20/06/2018

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