Long and Short Term Jumps in Commodity Futures Prices

2010 ◽  
Author(s):  
M. A. H. Dempster ◽  
Elena Medova ◽  
Ke Tang
Keyword(s):  
Commodity Futures ◽  
Futures Prices ◽  
Short Term

An Empirical Analysis of Market Efficiency and Price Discovery in Indian Commodity Market

2018 ◽  
Vol 19 (3) ◽  
pp. 771-789 ◽  
Author(s):  
Shashi Gupta ◽  
Himanshu Choudhary ◽  
D. R. Agarwal
Keyword(s):  
Error Correction ◽  
Market Efficiency ◽  
Price Discovery ◽  
Correction Term ◽  
Futures Market ◽  
Commodity Futures ◽  
Spot Price ◽  
Futures Prices ◽  
Short Term ◽  
Important Indicator

The present article is an attempt to empirically investigate the long-term market efficiency and price discovery in Indian commodity futures market. The study has been conducted with eight commodities which include two agricultural commodities, two industrial commodities, two precious metal and two energy commodities. Sophisticated statistical methods like restricted cointegration and vector error correction model (VECM) are used to analyse the spot and futures prices time series. Restricted cointegration test shows that near-month futures prices for all the commodities are cointegrated with the spot prices but futures prices of all the commodities are inefficient to predict the future spot price. Indian commodity futures market evidenced as the thinly traded market (Kumar & Pandey, 2013, Journal of Indian Business Research, 5(2), 101–121) rejects the null hypothesis of efficiency and unbiasedness for all the eight commodities which reconfirms the result of Fortenbery and Zapata (1997, Journal of Futures Markets, 17(3), 279–301). The presence of short-term biases in the Indian futures market is evidenced in the results of VECM model which indicates the presence of informational efficiency. The statistically significant value of past prices of spot and futures confirm the short-term inefficiency and biasedness. The significant value of error correction term (ECT) of futures prices suggests that commodity futures are the most important indicator of commodity price movements. The important implication of the results is for market traders. They can use the futures prices to discover the new equilibrium and earn profits by transmitting it to the spot market. The better understanding of the interconnectedness of these market would be useful for policymakers who try to establish stability in the financial markets.

Long and Short Term Jumps in Commodity Futures Prices

2008 ◽  
Author(s):  
M. A. H. Dempster ◽  
Elena Medova ◽  
Ke Tang
Keyword(s):  
Commodity Futures ◽  
Futures Prices ◽  
Short Term

Pricing of Futures Contracts

2018 ◽  
Author(s):  
Timothy A. Krause
Keyword(s):  
Fair Value ◽  
Commodity Futures ◽  
Futures Contracts ◽  
Spot Price ◽  
Futures Prices ◽  
No Arbitrage ◽  
Spot Prices ◽  
Cost Of Carry ◽  
Contract Expiration ◽  
The Cost

This chapter examines the relation between futures prices relative to the spot price of the underlying asset. Basic futures pricing is characterized by the convergence of futures and spot prices during the delivery period just before contract expiration. However, “no arbitrage” arguments that dictate the fair value of futures contracts largely determine pricing relations before expiration. Although the cost of carry model in its various forms largely determines futures prices before expiration, the chapter presents alternative explanations. Related commodity futures complexes exhibit mean-reverting behavior, as seen in commodity spread markets and other interrelated commodities. Energy commodity futures prices can be somewhat accurately modeled as a generalized autoregressive conditional heteroskedastic (GARCH) process, although whether these models provide economically significant excess returns is uncertain.

Financialization of Commodity Markets

2018 ◽  
Author(s):  
Kyle J. Putnam
Keyword(s):  
Business Cycle ◽  
Futures Markets ◽  
Commodity Price ◽  
Commodity Markets ◽  
Commodity Futures ◽  
Futures Prices ◽  
Price Behavior ◽  
Risk And Return ◽  
Commodity Futures Markets ◽  
Asset Class

In the early 2000s, financial investors began pouring billions of dollars into the commodity futures markets seeking the unique investment benefits of this distinct asset class. This “financialization” process has called into question the fundamental risk and return properties of commodity futures as evidence has emerged favoring the idea that the massive increase in investor flows caused a rise in futures prices, volatility, and intra- and intermarket return correlations. However, a contrarian line of research contends that the effects of the new “speculative” capital on the futures markets are unsubstantiated and the increased participation of financial investors poses little consequence to the economics of the marketplace. This latter line of literature maintains that the investment benefits of commodity futures have not been diminished and that fundamental factors and business cycle variations can explain the observed changes in commodity price behavior.

Chernobyl, commodities, and chaos: An examination of the reaction of commodity futures prices to evolving information

1987 ◽  
Vol 7 (5) ◽  
pp. 555-569 ◽  
Author(s):  
Stephen W. Pruitt ◽  
Wuttipan Tawarangkoon ◽  
K. C. John Wei
Keyword(s):  
Commodity Futures ◽  
Futures Prices
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