1Research Scholar, Haryana School of Business, Guru Jambheshwar University of Science & Technology, Hisar, Haryana
2Professor, Haryana School of Business, Guru Jambheshwar University of Science & Technology, Hisar, Haryana
Online published on 3 August, 2023.
This study empirically analyzes the lead-lag relationship between spot and futures markets of gold traded on MCX during period from January 2009 till December 2019.
The long run relationship between spot and futures markets is analyzed through the use of ARDL Bounds test. Error correction model (ECM) is conducted to determine the long run causality between markets. Wald test is administered to check short term causality in spot and futures gold prices. Further, Toda and Yamamoto approach of Granger causality is used to check the robustness of ARDL model by studying the causal relationship between variables in the long-run.
The outcomes of the study show that there exists bidirectional causality between the two markets of gold in both the long and short run. Outcomes of Toda and Yamamoto test confirm the findings of ARDL model.
It determines the leader market which helps investors to decide their investment and arbitrage strategy.
There is hardly any study which is conducted using ARDL model with Toda and Yamamoto approach to study the lead-lag relationship between futures and spot markets with reference to Indian commodity market.
Gold, Augmented Dickey Fuller Test, Phillip-Perron test, Bound Test, Toda and Yamamoto Test, Lead-lag Relationship, Ardl Model
