Information Transmission between India and International Commodities Futures Market: An Empirical Study for Bullion and Metals

Neha Berlia, Sanjay Sehgal

Abstract


This study examines the process of information transmission in futures prices of bullion (gold and silver) and metals (aluminum, copper, and zinc) between India, represented by MCX, and its global counterparts trading platforms, such as COMEX, LME, and SHFE, for the period of 2005 to 2012. Structural breaks are identified for all sample series, which capture the impact of the recent economic crisis on these commodity markets. The price discovery results confirm that there is a long-term equilibrium relationship among the futures prices of examined trading platforms in each commodity series, with the exception of aluminum. The MGARCH results of volatility spillovers indicate that, in the case of bullion, MCX seems to be more dominant than COMEX, implying that it is no longer a satellite market, while in case of metals, LME seems to play the dominant role followed by MCX and SHFE. The research contributes to the commodity market literature for emerging economies.


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DOI: http://dx.doi.org/10.5296/rae.v5i4.4797

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