Access the full text.
Sign up today, get DeepDyve free for 14 days.
W. Baumol (1957)
Speculation, Profitability, and StabilityThe Review of Economics and Statistics, 39
Sanford Grossman, Zhongquan Zhou (1996)
Equilibrium Analysis of Portfolio InsuranceJournal of Finance, 51
S. Irwin, Dwight Sanders (2010)
The Impact of Index and Swap Funds on Commodity Futures Markets: Preliminary Results
C. Granger (1969)
Investigating causal relations by econometric models and cross-spectral methods
J. Duan (1997)
Augmented GARCH (p,q) process and its diffusion limitJournal of Econometrics, 79
L. Harris (1986)
A transaction data study of weekly and intradaily patterns in stock returnsJournal of Financial Economics, 16
A. Darrat, Shafiqur Rahman, M. Zhong (2002)
On the Role of Futures Trading in Spot Market Fluctuations: Perpetrator of Volatility or Victim of Regret?Journal of Financial Research, 25
R. Hodrick, E. Prescott (1997)
Postwar U.S. Business Cycles: An Empirical InvestigationJournal of Money, Credit and Banking, 29
S. Sehgal, N. Rajput, Rajeev Dua (2012)
Futures Trading and Spot Market Volatility: Evidence from Indian Commodity MarketsAsian Journal of Finance and Accounting, 4
R. Engle (1982)
Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflationEconometrica, 50
G. Schwarz (1978)
Estimating the Dimension of a ModelAnnals of Statistics, 6
B. Pashigian (1986)
The Political Economy of Futures Market RegulationThe Journal of Business, 59
Vivek Bhargava, D. Malhotra (2007)
The relationship between futures trading activity and exchange rate volatility, revisitedJournal of Multinational Financial Management, 17
C. Lamoureux, W. Lastrapes (1990)
Heteroskedasticity in Stock Return Data: Volume versus GARCH EffectsJournal of Finance, 45
R. Leuthold (1983)
Commercial use and speculative measures of the livestock commodity futures marketsJournal of Futures Markets, 3
Avraham Kamara (1993)
Production Flexibility, Stochastic Separation, Hedging, and Futures PricesReview of Financial Studies, 6
D. Dickey, W. Fuller (1979)
Distribution of the Estimators for Autoregressive Time Series with a Unit RootJournal of the American Statistical Association, 74
Huseyin Gulen, S. Mayhew (2000)
Stock Index Futures Trading and Volatility in International Equity MarketsJournal of Futures Markets, 20
J. Stein (1987)
Informational Externalities and Welfare-Reducing SpeculationJournal of Political Economy, 95
Martin Bohl, Patrick Stephan (2012)
Does Futures Speculation Destabilize Spot Prices? New Evidence for Commodity MarketsJournal of Agricultural and Applied Economics, 45
Hai-qiang Chen, Qian Han, Yingxing Li, Kai Wu (2012)
Does Index Futures Trading Reduce Volatility in the Chinese Stock Market? A Panel Data Evaluation ApproachEmerging Markets: Finance eJournal
A. Chatrath, Sanjay Ramchander, F. Song (1996)
The role of futures trading activity in exchange rate volatilityJournal of Futures Markets, 16
A. Chatrath, Frank Song, B. Adrangi (2003)
Futures trading activity and stock price volatility: some extensionsApplied Financial Economics, 13
A. Darrat, Shafiqur Rahman (1995)
Has futures trading activity caused stock price volatilityJournal of Futures Markets, 15
H. Bessembinder, Paul Seguin (1992)
Futures-Trading Activity and Stock Price VolatilityJournal of Finance, 47
N. Chen, Charles Cuny, R. Haugen (1995)
Stock Volatility and the Levels of the Basis and Open Interest in Futures ContractsJournal of Finance, 50
Jian Yang, R. Balyeat, D. Leatham (2005)
Futures Trading Activity and Commodity Cash Price VolatilityOrganizations & Markets eJournal
A. Chatrath, Sanjay Ramchander, F. Song (1995)
Does options trading lead to greater cash market volatilityJournal of Futures Markets, 15
J. MacKinnon (1996)
Numerical Distribution Functions for Unit Root and Cointegration TestsJournal of Applied Econometrics, 11
B. Adrangi, Arjun Chatruth (1998)
Futures Commitments and Exchange Rate VolatilityJournal of Business Finance & Accounting, 25
Sanford Grossman (1987)
An Analysis of the Implications for Stock and Futures Price Volatility of Program Trading and Dynamic Hedging StrategiesRisk Management
W. Simpson, T. Ireland (1985)
The Impact of Financial Futures on the Cash Market for Treasury BillsJournal of Financial and Quantitative Analysis, 20
R. Weaver, Aniruddha Banerjee (1990)
Does futures trading destabilize cash prices? Evidence for U. S. live beef cattleJournal of Futures Markets, 10
F. Edwards (1988)
Futures trading and cash market volatility: Stock index and interest rate futuresJournal of Futures Markets, 8
Stephen Figlewski (1981)
Futures Trading and Volatility in the GNMA MarketJournal of Finance, 36
Purpose – Guar Seed crop is ruling the Indian International business mainly due to its application as a drilling fluid in shale energy industry concentrated in the USA. One of the allegations against futures market is its possible role in increasing the volatility of underlying physical market prices. Suspension of guar seed futures contract in 2012 at National Commodity Derivatives Exchange of India (NCDEX)-India, has reignited the controversy and raised an alarm bell to peek into obscure world of Indian commodity derivatives market. Against the backdrop of fiasco in guar futures trading, the purpose of this paper is to investigate whether sudden surge in futures trading volume leads to increase in the volatility of spot market prices. Design/methodology/approach – Guar seed spot returns volatility is modeled as a GARCH (1, 1) process. Futures trading volume and open interest are segregated into expected and unexpected components. The data are analyzed from 2004 to 2011 using Augmented GARCH model to study the contemporaneous relationship between spot volatility and unexpected futures trading activity and Granger Causality test for examining the dynamic relationship between them and ascertaining causality. Findings – Augmented GARCH model reports positive relationship between unexpected futures trading volume (UTV) and spot returns volatility, and, Granger Causality flows from UTV to spot volatility. Therefore, when the level of futures trading volume increases unexpectedly, the volatility of spot prices increases pointing toward the destabilizing impact of futures trading. However, hedger’s activity, represented by open interest is not seen to have any causal/destabilizing impact on spot price volatility of guar seed. Practical implications – The study provides empirical evidence to support the concern of regulators, genuine hedgers and other traders about the presence of excessive speculation and market manipulations perpetrated through futures market that is disturbing the underlying physical market instead of strengthening it by aiding in price discovery and risk mitigation. Originality/value – There are very few studies which have empirically investigated the temporal relation between volume and volatility in Indian agricultural commodity markets. With guar seed as a special case the present study investigates statistically the impact of futures trading on spot price volatility. In light of the findings of the study, the curb imposed on guar seed futures trading in 2012 was justified.
Agricultural Finance Review – Emerald Publishing
Published: Sep 7, 2015
Read and print from thousands of top scholarly journals.
Already have an account? Log in
Bookmark this article. You can see your Bookmarks on your DeepDyve Library.
To save an article, log in first, or sign up for a DeepDyve account if you don’t already have one.
Copy and paste the desired citation format or use the link below to download a file formatted for EndNote
Access the full text.
Sign up today, get DeepDyve free for 14 days.
All DeepDyve websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.