Measuring Efficiency of Selected Agriculture Commodities

Abstract

It has been observed that there is high fluctuation in eight agricultural commodities. In this study price discovery and causality has been studied in select six commodities out of the above mentioned eight commodities. We could not find sufficient data for cardamom and mentha oil. The commodities selected are chana,soyabean,soya oil,guargum,potato and pepper. The purpose is to study causality and price discovery in selected agri commodities. Design/methodology/approach - National Commodity Exchange of India (NCDEX) website. We could not found any cointegration between guargum and potato future and spot price. Single cointegration vector was being identified between spot and future prices of chana, Soyabean, soyarefined and Pepper. To measure causal nexus between future and spot price of the selected agricultural commodity Vector error correction model (VECM) is employed . This is consistent with market efficiency. Finally, impulse response function and Variance decomposition is used to see price discovery in these four commodities. Findings - The investigation shows that future leads to spot in case of soyabean and soya oil. Whereas in case of chana and pepper we found bi-directional relationship. As per Impulse response function and Variance decomposition we found future price leads in case of Chana,Soyaoil,Soyabean and pepper and performs price discovery function