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Volatility And Spill Over Effects In Indian Commodity Markets: A Case Of Pepper

  • Maitra Debasish

    (Institute of Rural Management Anand, India)

  • Dey Kushankur

    (T. A. Pai Management Institute, India)

Registered author(s):

    Modeling of volatility has been felt one of the major academic contributions in Indian commodity futures market. We have selected black pepper as a commodity for estimating volatility and its spillover incorporating a series of models. We have employed models with their specifications, namely, GARCH (2, 2), EGARCH (2,2), EGARCH (3,3), CGARCH (1,1), MGARCH (Diagonal VECH and BEKK) for both the spot and futures return-series of the commodity. Study reveals that bidirectional spillover is captured under GARCH (2, 2) model whereas unidirectional spillover is found under EGARCH (2, 2) model and results obtained through EGARCH (3,3) are not impressive. News impact curve depicts the steeper movement on the logarithmic conditional variance of futures and spot-return series due to ‘positive shocks’ and rather than to ‘negative shock’. Conditional correlation is also found dynamic and the correlation between spot and futures returns of pepper changes temporally.

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    File URL: http://eccsf.ulbsibiu.ro/RePEc/blg/journl/639maitra&dey.pdf
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    Article provided by Lucian Blaga University of Sibiu, Faculty of Economic Sciences in its journal Studies in Business and Economics.

    Volume (Year): 6 (2011)
    Issue (Month): 3 (December)
    Pages: 119-145

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    Handle: RePEc:blg:journl:v:6:y:2011:i:3:p:119-145
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    1. G. William Schwert, 1988. "Why Does Stock Market Volatility Change Over Time?," NBER Working Papers 2798, National Bureau of Economic Research, Inc.
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    6. Ng, Angela, 2000. "Volatility spillover effects from Japan and the US to the Pacific-Basin," Journal of International Money and Finance, Elsevier, vol. 19(2), pages 207-233, April.
    7. Baele, L., 2003. "Volatility Spillover Effects in European Equity Markets," Discussion Paper 2003-114, Tilburg University, Center for Economic Research.
    8. Lastrapes, William D, 1989. "Exchange Rate Volatility and U.S. Monetary Policy: An ARCH Application," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(1), pages 66-77, February.
    9. Lamoureux, Christopher G & Lastrapes, William D, 1990. "Persistence in Variance, Structural Change, and the GARCH Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 225-34, April.
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