Wednesday, January 03, 2007
Noticed an interesting paper on commodity futures trading in India
Underdeveloped Spot Markets and Futures Trading: The Soya Oil Exchange in India by Bharat Ramaswami with Jatinder Bir Singh. [pdf] They ask the question about whether the soya oil futures market in India is effective for hedging. They find that this works out well, despite all the problems of liquidity and transparency of the underlying spot market. The paper is well written and gives you insight. The econometrics is well focused - flowing directly from the questions and obtaining robust answers. It is not a mechanical exercise in crunching numbers; it is rooted in good domain knowledge about real world aspects of soya oil.