Price Discovery and Unpredictability Spillover in Metal Commodity Market in India: An Empirical Study

Abstract

In the context of this study, an attempt was made to evaluate the long-term implications that this trading pattern will have on the Indian commodity market. Gold, silver, copper, zinc, lead, and nickel, together with their respective spot and futures market values over the course of three years (April 2019-March 2022), are factored into a variety of economic models for this purpose. This study used several distinct economic models in order to conduct an analysis of the pertinent purpose. This study looks at the efficiency and volatility of prices in India's commodity market using the Johansen Cointegration, VECM, and Granger Causality tests, as well as the EGARCH model for a subset of MCX commodities. According to the evidence, future commodity prices are expected to outperform spot market prices in terms of price competency and information availability. When it comes to metal commodities, the research findings reveal that the impacts of unpredictability spillover have been discovered to be particularly robust throughout futures and spot markets. Because fundraisers and market participants want to minimise the pricing risks associated with price volatility, the findings of the research contain some constructive suggestions for mitigating such risks. The most recent information is made available to investors through the use of futures contracts, which may frequently be executed considerably more swiftly than spot prices.