Volatility Dynamics of Base Metal Futures: Empirical Evidence from an Emerging Economy

The paper examines the leverage effects and the spillover effects in the base metal cash and futures market. The study also attempts to find the trend and the pattern of volatility clustering in the base metal markets of India. Further, the significance of the risk premium and the possible downside...

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Main Author: Laxmidhar Samal
Format: Article
Language:English
Published: Vilnius University Press 2024-05-01
Series:Organizations and Markets in Emerging Economies
Subjects:
Online Access:https://www.journals.vu.lt/omee/article/view/32232
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author Laxmidhar Samal
author_facet Laxmidhar Samal
author_sort Laxmidhar Samal
collection DOAJ
description The paper examines the leverage effects and the spillover effects in the base metal cash and futures market. The study also attempts to find the trend and the pattern of volatility clustering in the base metal markets of India. Further, the significance of the risk premium and the possible downside risk of the market are also examined. The study confirms that unlike aluminium futures market, leverage effect is found for copper futures traded at MCX, India. Similar to aluminium, it is evident that the market advances generate larger volatility than the market turbulence in the cash and futures market of nickel. The study finds that the variance term (ξ) is not statistically significant for both cash and futures markets, which indicates that the risk premium of the asset is not significant to hedge. Further, unlike copper and aluminium, short-run volatility spillover is absent from the futures to the cash market of nickel. The paper concludes that the long-run volatility shock of futures has a persistent effect on the cash market of aluminium, copper and nickel and vice-versa. Future research might address the cross-volatility spillover between the base metal futures market. Further, the spillover between the Indian and London base metal futures markets is left for future research.
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spelling doaj-art-81d0894996934a479c148b196894b1092025-01-20T18:21:41ZengVilnius University PressOrganizations and Markets in Emerging Economies2029-45812345-00372024-05-01151(30)10.15388/omee.2024.15.9Volatility Dynamics of Base Metal Futures: Empirical Evidence from an Emerging EconomyLaxmidhar Samal0https://orcid.org/0000-0002-4713-6584P.G. Dept. of Commerce, B.B. (Auto.) Mahavidyalaya, India The paper examines the leverage effects and the spillover effects in the base metal cash and futures market. The study also attempts to find the trend and the pattern of volatility clustering in the base metal markets of India. Further, the significance of the risk premium and the possible downside risk of the market are also examined. The study confirms that unlike aluminium futures market, leverage effect is found for copper futures traded at MCX, India. Similar to aluminium, it is evident that the market advances generate larger volatility than the market turbulence in the cash and futures market of nickel. The study finds that the variance term (ξ) is not statistically significant for both cash and futures markets, which indicates that the risk premium of the asset is not significant to hedge. Further, unlike copper and aluminium, short-run volatility spillover is absent from the futures to the cash market of nickel. The paper concludes that the long-run volatility shock of futures has a persistent effect on the cash market of aluminium, copper and nickel and vice-versa. Future research might address the cross-volatility spillover between the base metal futures market. Further, the spillover between the Indian and London base metal futures markets is left for future research. https://www.journals.vu.lt/omee/article/view/32232futuresvolatilityDCC GARCHbase metalcoppernickel
spellingShingle Laxmidhar Samal
Volatility Dynamics of Base Metal Futures: Empirical Evidence from an Emerging Economy
Organizations and Markets in Emerging Economies
futures
volatility
DCC GARCH
base metal
copper
nickel
title Volatility Dynamics of Base Metal Futures: Empirical Evidence from an Emerging Economy
title_full Volatility Dynamics of Base Metal Futures: Empirical Evidence from an Emerging Economy
title_fullStr Volatility Dynamics of Base Metal Futures: Empirical Evidence from an Emerging Economy
title_full_unstemmed Volatility Dynamics of Base Metal Futures: Empirical Evidence from an Emerging Economy
title_short Volatility Dynamics of Base Metal Futures: Empirical Evidence from an Emerging Economy
title_sort volatility dynamics of base metal futures empirical evidence from an emerging economy
topic futures
volatility
DCC GARCH
base metal
copper
nickel
url https://www.journals.vu.lt/omee/article/view/32232
work_keys_str_mv AT laxmidharsamal volatilitydynamicsofbasemetalfuturesempiricalevidencefromanemergingeconomy