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Price Discovery and Volatility Spillovers in Indian Spot-Futures Commodity Market


  • P., Srinivasan


The present paper examines the price discovery process and volatility spillovers in Indian spot-futures commodity markets through Johansen cointegration, Vector Error Correction Model (VECM) and the bivariate EGARCH model. The study uses four futures and spot indices of the Multi Commodity Exchange of India (MCX), representing relevant sectors like agriculture (MCXAGRI), energy (MCXENERGY), metal (MCXMETAL), and the composite index of metals, energy and agrocommodities (MCXCOMDEX). Johansen cointegration test confirms the presence of long-term equilibrium relationships between the futures price and its underlying spot price of the commodity markets.The VECM shows that commodity spot markets of MCXCOMDEX, MCXAGRI, MCXENERGY and MCXMETAL play a dominant role and serve as effective price discovery vehicle, implying that there is a flow of information from spot to futures commodity markets. Besides, the bivariate EGARCH model indicates that although bidirectional volatility spillover persists, the volatility spillovers from spot to the futures market are dominant in case of all MCX commodity markets.

Suggested Citation

  • P., Srinivasan, 2011. "Price Discovery and Volatility Spillovers in Indian Spot-Futures Commodity Market," MPRA Paper 47412, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:47412

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    Cited by:

    1. Ansah, Isaac & Gardebroek, Cornelis & Ihle, Rico & Jaleta, Moti, 2015. "Analyzing Developing Country Market Integration using Incomplete Price Data and Cluster Analysis," 2015 Conference, August 9-14, 2015, Milan, Italy 210954, International Association of Agricultural Economists.
    2. P. Srinivasan & P. Ibrahim, 2012. "Price Discovery and Asymmetric Volatility Spillovers in Indian Spot-Futures Gold Markets," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 5(3), pages 65-80, December.
    3. repec:ebl:ecbull:eb-17-00592 is not listed on IDEAS

    More about this item


    Price Discovery; Volatility Spillover; VECM; Bivariate GARCH; Commodity Market;

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing


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