This paper attempts to model the dependence structures of India's and Asian natural rubber futures (derivatives) markets. Though copula-based literature in commodity markets appears to be limited, it can capture non-linearity unlike simple correlation measures, and thus, the former can estimate magnitude of dependence adequately. This study considers exchange-level futures price across NMCE (India), SHFE (China), TOCOM (Japan) and AFET (Thailand) from July 2006 to April 2010. Analysis shows that relatively a high degree of dependence has been observed between India's and China's markets in comparison to other markets. This paper sheds light on the dominant role of copulas for attaining the methodological congruence of dependence-structure modelling.

Debasish Maitra

Finance and Accounting

Kushankur Dey

<p>IIM Indore seeks to be a contextually-relevant business school with world-class academic standards that develops socially-conscious managers, leaders and entrepreneurs. IIM Indore is committed to: Excellence in management education, research, and training, Use of contemporary participant-centric pedagogies and teaching methods, A presence in emerging segments of management education.</p>

IIM Indore

International Journal of Financial Markets and Derivatives

Purpose: It has become an ongoing debate whether Indian commodity futures markets can accommodate farmers. The purpose of this paper is to examine whether Indian commodity futures markets help rationalize farmers' price expectation. The study starts with questions on the efficiency and other roles of commodity futures markets. Design/methodology/approach: From a sectoral standpoint and economic importance, the study considers pepper, coffee, and natural rubber (NR) futures and spot markets. The efficiency of futures markets, divergence/convergence and causality between futures and spot markets have been studied by employing co-integrations, error correction and causality models. The sample period of the data are taken from the inception of futures trading. These three commodities are also compared on the basis of trading at the futures markets vs spot markets. Findings: Analysis shows that though pepper futures market is informationally efficient in price discovery, while coffee and NR spot markets do the process faster. Pepper and coffee futures and spot prices exhibit the convergence; NR shows a sign of divergence. Unidirectional causality from pepper futures to spot market is observed wherein the former was weakly exogenous to the latter and while, bidirectional causality is observed in coffee and rubber. Coffee spot appears weakly exogenous while this remains inconclusive in the case of NR. Research limitations/implications: The authors analyzed the futures markets in rationalizing the spot market price in three plantation crops in India. In order to make the study more generalizable, further research is warranted in other commodities including those prices of which are government regulated. Originality/value: The paper is unique in terms of understanding the interaction or interrelationship between futures markets and spot markets and drawing inferences about the role of futures markets in price formation in plantation commodities like pepper, coffee and NR.

Fulltext

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Copulas and dependence structures: evidences from India's and Asian rubber futures markets

Journal	International Journal of Financial Markets and Derivatives
Publisher	Inderscience Publishers
ISSN	1756-7130
Open Access	No