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Herding and spillover effects in the Indian commodity futures market

Palak Dewan (Department of Basic Sciences and Humanities, Punjab Agricultural University, Ludhiana, India)
Khushdeep Dharni (Department of Basic Sciences and Humanities, Punjab Agricultural University, Ludhiana, India)

Journal of Agribusiness in Developing and Emerging Economies

ISSN: 2044-0839

Article publication date: 4 May 2022

Issue publication date: 21 November 2023

221

Abstract

Purpose

The study examines herding in the Indian stock and commodity futures market including agricultural, metal and energy commodities. Herding is studied under various market conditions: rising and declining, high and low volatility. The study also examines spillover effects of herding.

Design/methodology/approach

The study adapts the cross-sectional absolute deviation model given by Chang et al. (2000) to examine herding in Indian stock and commodity futures markets.

Findings

The results of the study indicate absence of herding among commodity futures under all market conditions except for the declining market where herding is present among energy futures. The investors investing in agricultural and energy commodities have a higher tendency to herd during high volatility days as compared to low volatility days. Further, the study of herding spillover effects indicates that the price fluctuations in metal commodities affect herding in agricultural and energy commodities.

Research limitations/implications

The results can help market participants to diversify the risk by investing in agricultural, metal and energy futures along with the stocks.

Originality/value

Majority of the previous studies explore herding among stocks and ignore commodities especially agricultural commodities. This study attempts to fill the gap by studying herding among various commodity futures. To the best of our knowledge this is the first study to explore herding spillover effects in the Indian stock and commodity futures market.

Keywords

Acknowledgements

This work was supported by the Indian Council of Social Science Research (ICSSR) via file no. RFD/2017-18/COMM/GEN/080.

Citation

Dewan, P. and Dharni, K. (2023), "Herding and spillover effects in the Indian commodity futures market", Journal of Agribusiness in Developing and Emerging Economies, Vol. 13 No. 5, pp. 748-761. https://doi.org/10.1108/JADEE-11-2021-0288

Publisher

:

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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