Download - Testing the Efficiency of Agriculture Commodities Market in India Prof Sanjay Sehgal Abhishek Singh
Testing the Efficiency of Testing the Efficiency of Agriculture Commodities Agriculture Commodities
Market in IndiaMarket in IndiaProf Sanjay Sehgal Prof Sanjay Sehgal
Abhishek SinghAbhishek Singh
Place of agriculture.Place of agriculture. Agriculture contributes about 22% to the GDP of the Indian
economy.It employees around 57% of the
labor force on a total of 163 million hectares of land.
Institutional development, which Institutional development, which improves the liquidity and efficiencyimproves the liquidity and efficiency
of commodity markets, would of commodity markets, would impact upon a large fraction of impact upon a large fraction of India’s population.India’s population.
It imposes considerable direct costs It imposes considerable direct costs upon the government, and has led upon the government, and has led to a suboptimal resource allocation. to a suboptimal resource allocation.
Tetable HypothesisTetable Hypothesis
1) The introduction of 1) The introduction of commodity future has commodity future has increased spot market increased spot market efficiencyefficiency
2) Future prices are 2) Future prices are determined on the basis of determined on the basis of cost of carry modelcost of carry model
DATA SOURCEDATA SOURCE
Spot Prices :NCDEXSpot Prices :NCDEX
Forward Prices :NCDEXForward Prices :NCDEX
Transportation cost:Transportation cost:
Warehousing Cost :CWC ,SWCWarehousing Cost :CWC ,SWC
Random walk testRandom walk testSSerial correlation coefficient testerial correlation coefficient test
Runs testRuns test
MethodologyMethodology
Forward pricing with transportation costForward pricing with transportation cost
F = (SF = (S00 +U) e +U) e rTrT
F = SF = S00ee(r+u)T(r+u)T
Forward pricing with convenience YieldForward pricing with convenience Yield
F = SF = S00ee(r+u-y)T(r+u-y)T
Cost-of-carry Model Futures price = Spot Price + Carry Cost