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Testing the Efficiency of
Agriculture Commodities
Market in India
Prof Sanjay Sehgal
Abhishek Singh
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
improves the liquidity and efficiency
of commodity markets, would impact
upon a large fraction of India’s
population.
It imposes considerable direct costs
upon the government, and has led to a
suboptimal resource allocation.
Tetable Hypothesis
1) The introduction of
commodity future has increased
spot market efficiency
2) Future prices are determined
on the basis of cost of carry
model
DATA SOURCE
Spot Prices :NCDEX
Forward Prices :NCDEX
Transportation cost:
Warehousing Cost :CWC ,SWC
Methodology
Random walk test
Serial correlation coefficient test
Runs test
Cost-of-carry Model
Futures price = Spot Price + Carry Cost
Forward pricing with transportation cost
F = (S0 +U) e
rT
F = S0e(r+u)T
Forward pricing with convenience Yield
F = S0e(r+u-y)T