This study aims to validate the “expectancy theory” of asset pricing and explores the price discovery process in metals futures markets.
Abstract
Purpose
This study aims to validate the “expectancy theory” of asset pricing and explores the price discovery process in metals futures markets.
Design/methodology/approach
This paper adopts the Johansen cointegration and vector error correction model approach to investigate the potentials of Pairs trading in the metals market during the period 2008–2019.
Findings
The results find the price movements in metal markets are not random walk and the current “futures” prices are the reasonable estimate of the “spot” metal prices in future. This study does not notice any significant differences in the price efficiency across metals markets, which signal the effects of limited idiosyncratic forces in price transmission.
Practical implications
The research suggests the covert use of metal futures to make gains from arbitrage trading.
Originality/value
The study emphasizes the potential of “pair trading” in commodity market context that is seldom discussed in academic papers.
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The purpose of this paper is to investigate the recession effects in market efficiency of natural rubber futures contracts traded in India.
Abstract
Purpose
The purpose of this paper is to investigate the recession effects in market efficiency of natural rubber futures contracts traded in India.
Design/methodology/approach
The research draws inferences from Granger causality and Engle–Granger cointegration tests, which are administered separately on 14 year daily price data spanning into two distinct, non-overlapping time series of 2004–2008 and 2009–2017.
Findings
Analysis shows that rubber futures market is informationally efficient in price discovery. The results of cointegartion tests indicate that a long-term relationship does exist between futures and spot prices of the natural rubber in India. The recession effects in the market efficiency of rubber futures contracts are evident from the increase in optimal hedge ratios estimated with the cointegration methodology.
Research limitations/implications
The study pursues a simple cointegration methodology to assess the causal relations between spot and futures market prices in the Indian context. Future studies investigating the long-run causal relations, with error correction framework, between spot and future prices of rubber from other leading rubber producing countries can validate the findings more on this issue.
Practical implications
The research expects to pass on vital information inputs on the implications of future contracts to rubber traders for managing their portfolios. The study of this kind definitely will be a great help to farmers and exporters who are potentially interested in gaining access to a hedging vehicle.
Originality/value
The paper is unique in terms of understanding the effects of economic recession in information efficiency of futures market. Moreover, a limited number of studies have explored the functional utilities of rubber futures in emerging market context.
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Keywords
This paper aims to identify the impact of economic integration on trade competitiveness and demonstrate its effects on trade and investment performance of member nations.
Abstract
Purpose
This paper aims to identify the impact of economic integration on trade competitiveness and demonstrate its effects on trade and investment performance of member nations.
Design/methodology/approach
The study compiles some price indices to provide a systematic assessment of competitiveness in the BRICS region. The panel regression framework estimates the impact of integration on trade competitiveness and the external sector performance of BRICS nations.
Findings
The findings of the research highlight the prospects for strong, closer and sustained integration in BRICS and, more importantly, the contribution of competitiveness to FDI receipts and export growth.
Research limitations/implications
The assessment of exports and investment experiences of BRICS nations, particularly China and India, provides further evidence in support of the logical design and strategic use of their foreign trade policies.
Originality/value
The economic partnership that wants to sustain this high road to global economic space needs strategic orientations to promote their partnership in other interest areas to make the cooperation more competitive in price terms.
This paper aims to investigate price responses and volatility spillovers between commodity spot and futures markets. The study ultimately seeks the evidence-based claims on the…
Abstract
Purpose
This paper aims to investigate price responses and volatility spillovers between commodity spot and futures markets. The study ultimately seeks the evidence-based claims on the efficiency of the long run and short run horizontal price transmissions from futures markets to spot markets.
Design/methodology/approach
This study used the most recent daily price series of pepper, cardamom and rubber, during the period 2004–2019, use “cointegration-ECM-GARCH framework” and verify the persisting validity of the “expectancy theory” of commodity futures pricing.
Findings
The results offer overwhelming evidence of futures market dominance in the price discoveries and volatility spillovers in spot markets. However, this paper finds asymmetric responses between cash and futures prices across markets. The hedging efficiency of futures contracts is commodities specific’ where spices futures are more efficient than the rubber futures.
Practical implications
The study passes on vital information to the producers and traders of spices and rubber who have a potential interest in the use of futures contracts to make profits from arbitrage between futures and cash markets.
Originality/value
The paper is unique in terms of understanding asymmetric price linkages in markets for plantation crops.
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Keywords
This paper, using the model suggested by Cantor and Pecker (1996), aims to explore the relations between sovereign ratings and bond yield spreads in emerging markets.
Abstract
Purpose
This paper, using the model suggested by Cantor and Pecker (1996), aims to explore the relations between sovereign ratings and bond yield spreads in emerging markets.
Design/methodology/approach
The ordinary least square regression procedure administered on the most recent sovereign ratings of 46 countries demonstrates how the macroeconomic information embody in the sovereign rating scores predict their bond yield spreads relative to the yield on US Treasury bond.
Findings
The research finds that the assigned rating scores do not herald the complete elites of the macroeconomic conditions in emerging markets, and there is more incremental information in the publicly available macroeconomic variables, which is much useful in predicting bond yield spreads than that embedded into the sovereign ratings.
Practical implications
The outcomes of the research have strategic implications for global investors and policymakers. The use of credit rating scores along with the macroeconomic fundamentals in emerging economies produces better predictions than the benchmark predictions solely based on the rating scores suggested by the previous research.
Originality/value
This study is the first one to address the issues related to sovereign ratings and bond yield spread in developing and emerging markets using the most recent ratings during the period of the economic recoveries, following the global financial crisis of 2008.