Price Discovery In Agricultural Commodity Markets: Empirical Evidence From India

Abstract

The study examines long run equilibrium relationship between future and spot commodity markets for Channa, Gaur Seed, Soybean and Kapas using Johansen Cointegration. Vector Error Correction Model is used to capture Short Run Adjustment Process between integrated commodity markets. Empirical results show that except for Kapas all commodities are cointegrated and Future market plays a dominant role in the price discovery process.