1. VOLATALITY AND FORECASTS OF COMMODITY EXCHANGE MARKET IN INDIA
DR. SANJEEV GUPTA
(SENIOR FACULTY AND EDITOR OF JOURNAL)
APEEJAY INSTITUTE OF MANAGEMENT
HOSHIARPUR ROAD
RAMAMANDI
JALANDHAR M:
DR. R. S. BAWA
REGISTRAR AND PROFESSOR OF ECONOMICS
GURU NANAK DEV UNIVERSITY
AMRITSAR
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2. INTRODUCTION
Commodity markets like stock and foreign exchange markets are of great help not only for those who participates but also for economy as a whole.
Commodity markets in India are still in their initial stage of development.
Commodity market in India have a huge potential due to the fact that Indian economy is agriculture based economy.
Liberalisation initiatives taken by government of India has given strong push to the activities of commodities market.
The governing body of trading in commodities in India i.e. Forward Markets Commission, has taken sincere initiatives for the establishment of national level multi-commodity exchanges in India and creating a world class trading environment for traders.
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3. Contd…
In the first two quarters of the turnover of Multi Commodity Exchange (MCX) of India was Rs. 1, crore
In case of National Commodity and Derivatives Exchange Ltd. (NCDEX) turnover was Rs crore
In case of National Multi Commodity Exchange of India (NMCE) turnover was 84,433 crore and others Rs crore.
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4. ISSUES WORTH FOR CONDUCTING RESEARCH
Can an investment in commodity futures earn a positive return when spot commodity prices are falling?
How to compare the spot and futures returns of commodity market?
What are the returns to investing in commodity futures, and how do these returns compare to investing in stocks and bonds?
Are commodity futures riskier than stocks and foreign exchange?
Do commodity futures provide a hedge against inflation?
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5. Contd…
Degree of volatility in commodity market as compared to stock and foreign exchange markets?
Forecasts of commodity indexes in order to take decision regarding selling and purchasing on rational basis and not on purely judgment basis.
Can commodity futures provide diversification to other asset classes?
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6. OBJECTIVES OF RESEARCH
Present proposal has not only highlight the research areas but will also empirically address to the following specific objectives:
To check the volatility of commodity market on day-to-day basis by using certain test specified in the econometric literature.
To suggest the suitable models to forecast the spot and future indexes of various groups of commodities.
To recommend the measures for enhancing the involvement of people in commodity trading.
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7. DATA BASE AND METODOLOGY
In order to fulfill the above objectives secondary data will be culled from the web sites of NCDEX and MCX. In addition to this various publications like journals, web sites and magazines will also be consulted.
Survey of people regarding awareness of commodity markets will be conducted. In this case of primary data will collected through non-disguised structured questionnaire consisting of closed ended, open ended and Likert Scaled type questions.
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8. STATIONARITY
Before checking the volatility of returns, we have to check the stationarity of the data on returns (rt ). Where rt =log ( xt / xt-1 ), xt and xt-1 are closing index values at two successive days t-1 and t respectively. In order to check the stationarity we will apply the following tests.
Autocorrelation Function (correlogram).
Ljung-Box statistics.
Dicky-Fuller and Augmented Dicky- Fuller tests.
Phillips-Perron Unit Root test.
We have taken some data on commodity market and like financial markets it was found that they were non-stationary and after first differencing they became stationary
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9. VOLATALITY
Volatility in commodity markets is of immense interest to academics, policy makers and practitioners because high volatility means huge losses and gains and hence greater uncertainty.
The volatility of commodity prices make the commodity derivatives not only risk hedging instruments but also strategic investment assets.
In the present study we will apply GARCH family models to test the volatility.
After applying these measures we will conclude the evidence of volatility clustering and suggest that whether volatility is predictable or not.
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10. FORECASTING
Forecasts on commodity markets are big push towards the bright future of commodity market. In the Econometric literature there are lot of methods varying from naïve methods to sophisticated and complicated methods.
Present study will prepare the forecasts of spot and future commodity Indexes by applying Adaptive Exponential Smoothing, ARIMA and Neural Network Models.
Suitable forecasting model will be suggested on the basis various accuracy measures like Mean Error, Mean Square Error etc.
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11. MEASURES FOR ENHANCING AWARENESS REGARDING COMMODITY MARKETS
Present study will recommend the various measure for enhancing awareness level regarding commodity markets
In order to know present level of involvement of investors in commodity markets as compared to stock and foreign exchange markets comprehensive survey will be conducted by administering non-disguised structured questionnaire.
Analysis of questionnaire will help to understand the reasons for less involvement in commodity markets and will help in suggesting strategy for enhancing involvement of investors in commodity market.
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12. THANK YOU
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