Dynamic Relationship between Future and Spot Prices – A case study of Gaur Seed

The study aims to find out the dynamic relationship between future and spot prices of Guar seed traded in NMCE from the period 01/01/2016 to 31/03/2018. Knowledge of price movement and price discovery process of commodities will help the producers and consumers appropriate investment decision. After confirming stationarity at first difference Johansen’s cointegration test is performed to analyse long run equilibrium relationship. After confirming cointegration, Vector Error Correction Model is applied to know the speed of adjustment towards equilibrium in case of disequilibrium in short run. The lead lag relationship between future and spot prices are analysed using Granger Causality test.