Market efficiency in Indian soybean futures markets

Abstract

Purpose – The National commodity exchanges were established in India in the year 2003-2004 to perform the functions of price discovery and price risk management in the economy. The derivatives market can perform these functions properly only if they are efficient and unbiased. So, there is a need to properly evaluate these aspects of the Indian commodity derivatives market. The purpose of this paper is to test the market efficiency and unbiasedness of the Indian soybean futures markets. Design/methodology/approach – The paper uses cointegration and a QARCH-M-ECM-based framework to test the market efficiency and unbiasedness in the soybean futures contract traded in the National Commodity Derivatives Exchange (NCDEX). The cointegration test is used to test the long-run unbiasedness and market efficiency of the contract, while the QARCH-M-ECM model is used to test the short-run market efficiency and unbiasedness of the contract by allowing for a time-varying risk premium. The price data is also tested for presence of structural breaks using a Zivot and Andrews unit root test. Findings – The soybean contract is unbiased in the long run, but there are short-run market inefficiencies and also a presence of a time-varying risk premium. Though the weak form of market efficiency is rejected in the short run, the semi-strong market efficiency is not rejected based on the forecasts. Originality/value – This is the first paper to consider time-varying risk premium while performing the tests of market efficiency and unbiasedness on Indian commodity markets.

Study the Efficiency Hypothesis in the Egyptian Stock Market

“…However, risk premium does not need to be fixed and may vary according to market fluctuations, so there is a different risk premium for time. Future markets can be efficient and unbiased in the long run, but incompetent situations may appear and may not be unbiased in the short term (Ranganathan and Ananthakumar, 2014).…”

PENGUJIAN EFISIENSI PASAR DAN TINGKAT KONVERGENSI HARGA KOMODITAS KOPI ARABIKA DAN KOPI ROBUSTA (Studi Kasus pada Pasar Komoditas Berjangka di Indonesia)

“…Pasar dari berbagai negara telah diuji selama bertahun-tahun, namun kenyataannya masih terdapat banyak perbedaan hasil penelitian. Beberapa penelitian tentang uji efisiensi pasar berjangka dari berbagai komoditas telah dilakukan oleh para peneliti seperti (Sathye, 2006), (Sabuhoro & Larue, 1997), (Neto & Garcia, 2013), (Wang & Ke, 2005), (Ali & Gupta, 2011) , (Ranganathan & Ananthakumar, 2014), (Samal, G.V., Swain, A.K., Shoo, A., & Soni, 2015), (Haq, Irfan ul., Rao, 2014), (Moholwa, 2005), (Kumar & Pandey, 2013). Kajian para peneliti mengindikasikan suatu hubungan efisien maupun tidak efisien antara harga spot dan harga future dalam hubungan keseimbangan jangka panjang dan jangka pendek.…”

“…Penelitiannya menemukan bahwa pasar future memiliki kemampuan yang kuat untuk mempediksi harga spot pada analisis jangka pendek. Pengujian efisiensi pasar jangka pendek dan unbiased juga dilakukan oleh (Ranganathan & Ananthakumar, 2014). Hasil penelitian mereka menunjukkan bahwa kontrak kedelai unbiased pada jangka panjang dan tidak efisien pada jangka pendek.…”

Futures Markets and Farmers Welfare: Are They in Sync?

“…Gupta and Varma (2016) found stronger information flow from the rubber futures to spot markets, indicating price discovery happening in futures markets. Ranganathan and Ananthakumar (2014) found short-run market inefficiencies and also a presence of a time-varying risk premium in soybean futures markets. Shihabudheen and Padhi (2010) analyzed gold, silver, crude oil, castor seed, jeera, and sugar.…”