Structural Breaks in Commodity Futures Markets: Evidence from India

Posted: 15 Nov 2013

See all articles by Tarun Kumar Soni

Tarun Kumar Soni

Fore School of Management; NITI Aayog

Nidhi Choudhary

Banasthali Vidhyapith

Date Written: November 15, 2013

Abstract

One of the major assumptions of predictive statistics is that it assumes the parameters to be consistent and constant over time. However, in actual scenario the financial time series data is highly volatile and inconsistent. Any shift or change in the time series under study can challenges the consistency and constancy of the parameter which can weaken the efficiency of parameter. This unexpected shift in time series is referred to as structural break in the data. In forecasting time series, ignoring structural breaks, which often occur in the time series, significantly reduces the accuracy of the forecast (Pesaran and Timmermann, 2003). The present study is an attempt to highlight the structural breaks in the Indian Commodity Markets and will provide a justification to the shift in parameters of data. The results have important implications on the previous research done on the Indian commodity markets which have ignored the structural breaks in the data. Ignoring the breaks can result in incorrect assessment and can paint a fake picture about Indian commodity markets.

Keywords: structural breaks, commodity markets, bai-perron test, India

JEL Classification: C10, C22

Suggested Citation

Soni, Tarun Kumar and Choudhary, Nidhi, Structural Breaks in Commodity Futures Markets: Evidence from India (November 15, 2013). Available at SSRN: https://ssrn.com/abstract=2354840

Tarun Kumar Soni (Contact Author)

Fore School of Management ( email )

New Delhi
India

NITI Aayog ( email )

NITI Aayog
New Delhi, 100018
India

Nidhi Choudhary

Banasthali Vidhyapith ( email )

P. O Banasthali
Banasthali
Newai, Rajasthan 304022
India

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
854
PlumX Metrics