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Testing Efficiency of Guar seed Futures: Empirical Evidence from India

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  • Tarun Soni

    ()
    (National Institute of Financial Management, Faridabad, Haryana (India))

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    Abstract

    The paper aims to study the market efficiency, unbiasedness among Guar seed futures contracts traded at National Commodity & Derivatives Exchange Ltd (NCDEX). The study has tested the market efficiency and unbiasedness with different maturities using cointegration analysis, and short-term market efficiency, using an error correction model and GARCH-M-ECM. The results suggest that futures market for guar seed is inefficient and biased in both short run and long run for all maturity periods, which may be caused by over-speculation or market manipulation. The results indicate an urgent need to provide more powers to FMC to regulate the market and penalize any insider trading, cartelization and price manipulations.

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    File URL: http://www.rejournal.eu/Portals/0/JE%2047/Y%20Tarun.pdf
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    Bibliographic Info

    Article provided by Department of International Business and Economics from the Academy of Economic Studies Bucharest in its journal Romanian Economic Journal.

    Volume (Year): 16 (2013)
    Issue (Month): 47 (March)
    Pages: 211-228

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    Handle: RePEc:rej:journl:v:16:y:2013:i:47:p:211-228

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    Related research

    Keywords: Cointegration; Market efficiency; Futures market; Guar gum;

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    References

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    1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    2. Jabir Ali & Kriti Bardhan Gupta, 2011. "Efficiency in agricultural commodity futures markets in India: Evidence from cointegration and causality tests," Agricultural Finance Review, Emerald Group Publishing, vol. 71(2), pages 162-178, July.
    3. Maslyuk, Svetlana & Smyth, Russell, 2009. "Cointegration between oil spot and future prices of the same and different grades in the presence of structural change," Energy Policy, Elsevier, vol. 37(5), pages 1687-1693, May.
    4. James H. Stock & Mark W. Watson, 1991. "A simple estimator of cointegrating vectors in higher order integrated systems," Working Paper Series, Macroeconomic Issues 91-3, Federal Reserve Bank of Chicago.
    5. McKenzie, Andrew M. & Holt, Matthew T., 1998. "Market Efficiency In Agricultural Futures Markets," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20933, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
    7. Vishwanathan Iyer & Archana Pillai, 2010. "Price discovery and convergence in the Indian commodities market," Indian Growth and Development Review, Emerald Group Publishing, vol. 3(1), pages 53-61, April.
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