Price dynamism of pepper in spot and futures market

This paper has examined the price dynamics of pepper in spot and futures market. Futures Trading in pepper has been undertaken without break since 1957 in the India Pepper and Spice Trade Association (IPSTA). IPSTA launched its online trading system from April 2004 and is the only regional exchange to go for full-fledged online trading IPSTA Pepper prices data were used for the sample period from January 2006 to March 2012. The ADF test and PP test are used in testing the stationarity levels. The Johansen Co-integration test used provides empirical evidence that spot and future prices are co-integrated. The Granger Causality test also shows that there exists a bi-directional relationship between the spot and futures prices evidencing that the pepper prices do possess the price discovery function.