Price Discovery in Agricultural Markets

• Main Authors: Keshab Shrestha, Ravichandran Subramaniam, Thangarajah Thiyagarajan
• Format: Article
• Language: English
• Published: Pompea College of Business 2020-05-01
• Series: American Business Review
• Subjects: cointegration; information share; price discovery
• Online Access: https://digitalcommons.newhaven.edu/cgi/viewcontent.cgi?article=1089&context=americanbusinessreview

In this study, we empirically analyze the contribution of futures markets to the price discovery process for seven agricultural commodities using the generalized information share proposed by Lien and Shrestha (2014) and component share based on the permanent-temporary decomposition proposed by Gonzalo and Granger (1995). We find that most of the price discovery takes place in the futures markets with the exception of cocoa. Our results show that futures markets play an important role in price discovery process. These results are important to academicians, practitioners, policymakers as well as business leaders.