Price Discovery in Developed and Emerging Commodity Futures Exchanges

Abstract

     This study investigates the price discovery process in developed and emerging agricultural commodity futures exchanges. The results of Vector Error Correction Models (VECM) show that price discovery mechanism mostly works in all developed and emerging commodity futures exchanges except in white corn contracts of the Republic of South Africa Exchange and soybean contracts of Indian Exchange. However, the spot price of some commodity in some countries lead futures price. The empirical results reveal that wheat contracts of U.S., Malaysia's crude palm oil contracts, RSS3 contracts and white rice 5% contracts of Thailand contribute to over 75 percent of information share in price discovery.