A Study of the Causality and Lead-Lag Relationships in the MCX Spot and Futures Indices



This paper aims to investigate the causal relationships and lead-lag behaviors in the Indian Commodities market, by the use of econometric techniques. The study aims to apply the Vector Error Correction Model (VECM) to identify the lead-lag relationships, direction and speed of adjustments in the Indian commodities market. The findings of this study suggest that, in the long run, the spot markets lead the futures in most of the commodity segments, while there is a causal relationship from futures to spot also in the case of Energy segment alone. It also finds out the extent to which the futures markets adjust in order to reach the equilibrium in the long run. This study can be helpful when deciding policy changes, regulatory frameworks, and investment and portfolio decisions.



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