Information linkages between commodity and equity markets: Evidence from India

Abstract

The dramatic increase in financialisation of commodity futures, which implies increase in inflows of funds to commodity futures market by considering commodities as an alternative asset for investment and not purely as consumables in recent decades which has generated an intensive debate in academic literature that whether commodities as an investible asset move in sync with other financial assets or not. In this context the present study attempts to examine the comovements between Commodity and Equity Markets by applying Correlation analyses and Cointegration over a time frame ranging from January 2009 to December 2018. The research has recognized that there is no evidence of long run relationship between equity and commodity markets which signifies the role of commodity futures as an effective investment vehicle to get diversification benefits in a traditional portfolio.