Volatility Linkages in Commodity Futures Markets: Evidence from the Rubber Futures Market in India

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Authors

  • P. Narayanan
     E K Nayanar Memorial Government College, Elerithattu, Kasaragod - 671314, Kerala ,IN
  • T. K. Sebastian
     Nirmalagiri College, Kuthuparamba, Kannur - 670701, Kerala ,IN
  • N. Karunakaran
     People Institute of Management Studies (PIMS), Munnad-Post, Chengala (Via), Kasaragod - 671541, Kerala ,IN

DOI:

https://doi.org/10.18311/sdmimd/2024/32928

Keywords:

Futures, GARCH, India, Spot, Spill-Over, Volatility

Abstract

The volatility spill-over effect of the commodity futures markets has been a matter of debate ever since the establishment of futures markets in India. The apprehensions regarding the price destabilizing role of futures trade called for overcautious regulatory supervision. The actions like suspension of contracts, bans on futures trade in certain commodities, and restrictions on trade volumes were very frequent; making the growth of the commodity futures market a chequered one. The Expert Committee appointed in 2007 to examine the effect of futures trade on commodity prices failed to make any categorical remark partly on account of the absence of long-term data. A commodity-specific analysis is much warranted as the price effect of the futures trade varies across the markets. The paper examined the volatility spill-over effect of the rubber futures market using a bivariate GARCH model with BEKK parameterization and found that there is no positive volatility spill-over from futures to spot. The weak linkage between futures trade and futures price variation further strengthens the finding. The absence of volatility spill-over from futures to spot in the case of rubber is due to the failure of the futures market to lead the spot market in pricing the commodity.

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Published

2024-02-09

How to Cite

Narayanan, P., Sebastian, T. K., & Karunakaran, N. (2024). Volatility Linkages in Commodity Futures Markets: Evidence from the Rubber Futures Market in India. SDMIMD Journal of Management, 15(1), 109–118. https://doi.org/10.18311/sdmimd/2024/32928

Issue

Volume 15, Issue 1, March 2024

Section

Articles

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Copyright (c) 2023 P. Narayanan, T. K. Sebastian, N. Karunakaran

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

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