Testing price volume relationships for Indian commodity futures
- 7 June 2011
- journal article
- Published by Emerald in Journal of Indian Business Research
- Vol. 3 (2), 117-131
- https://doi.org/10.1108/17554191111132233
Abstract
PurposeThe nature of price volume relationship in asset market has been an interesting subject in financial research as it reveals a very important aspect which has implications for market efficiency. The purpose of this paper is to examine price volume relationships in Indian commodity futures market.Design/methodology/approachThere are two competing models in price volume relationship. Mixture of distribution hypothesis, suggesting a positive contemporaneous relationship and sequential information arrival hypothesis (SIH), suggesting a positive intertemporal causal relationship. Both are tested using correlation coefficient and Granger causality test with vector auto regressive methodology.FindingsThough there exists contemporaneous correlation between volume and price change in some of the cases, but in general on the basis of the presence of Granger causality it follows that SIH is supported.Research limitations/implicationsAs only three commodities futures have been studied in this paper, this study can be extended to include more number of commodities currently being traded so as to make it more exhaustive.Practical implicationsThe research has been done with the data of MCX Gold, MCX Silver and MCX Crude. The results of causality suggest that inefficiency level is maximum in Silver which may be attributed to informational asymmetry.Originality/valueThe Indian commodity futures market is of very recent origin. Hence, very little research work has been undertaken in this space. The paper presents an assessment of the existence of informational asymmetry among the three commodity futures under the study.Keywords
This publication has 30 references indexed in Scilit:
- A TARCH examination of the return volatility–volume relationship in electricity futuresApplied Financial Economics, 2006
- Price Volatility, Trading Volume, and Market Depth: Evidence from Futures MarketsJournal of Financial and Quantitative Analysis, 1993
- A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance MatrixEconometrica, 1987
- Co-Integration and Error Correction: Representation, Estimation, and TestingEconometrica, 1987
- Cross-Security Tests of the Mixture of Distributions HypothesisJournal of Financial and Quantitative Analysis, 1986
- Futures Price Variability: A Test of Maturity and Volume EffectsThe Journal of Business, 1986
- The Price Variability-Volume Relationship on Speculative MarketsEconometrica, 1983
- The relationship between volume and price variability in futures marketsJournal of Futures Markets, 1981
- An Equilibrium Model of Asset Trading with Sequential Information ArrivalThe Journal of Finance, 1981
- Investigating Causal Relations by Econometric Models and Cross-spectral MethodsEconometrica, 1969