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100			_aGupta, C. P., _931805
245			_a Agricultural Commodity Trading: Is it Destabilizing Spot Markets?
300			_a47-57 p.
520			_aThe 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. 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. 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			_a*Market volatility
653			_aGranger causality test
653			_aLiquidity (Economics)
653			_aFarm produce
653			_aPressure groups
653			_aChickpea
653			_aAgricultural Commodity
653			_aEGARCH
653			_aFuture Trading
653			_aOpen Interest Price
653			_aDestabilization Spot Volatility
700			_aSehgal, Sanjay _931806
700			_aWadhwa, Sahaj _931807
773	0		_029959 _970623 _aBANDOPADHYAY, TATHAGATA _dIIM AHMEDABAD _o5558806 _tVIKALPA:THE JOURNAL OF DECISION MAKERS _x0256-0909
942			_2ddc _cJA-ARTICLE