Literature Review

The Impact of Commodity Price Risk on Firm Value An Empirical Analysis of Corporate Commodity Price Exposures
Financial risks for nonfinancial institutions consist broadly defined of unexpected changes in foreign exchange rates, interest rates and commodity prices. Interestingly, the commodity price exposure of corporations has been rarely investigated in the literature to date, even though most commodity prices are more volatile than exchange rates and interest rates. Commodity price changes can be expected to have an impact on firm value due to their relevance as input or output factors in the corporate production process. In addition, there may be important indirect effects on the value of firms to their shareholders resulting from the impact of commodity price changes on customers, suppliers or competitors and thus the competitive position of companies. Author: Shnke M. Bartram written in year 2005. Lancaster University, U.K. References: Literature review in Google scholar. Name of report is The Impact of Commodity Price Risk on Firm Value - An Empirical Analysis of Corporate Commodity Price Exposures.

Gold Pricing in India: An Econometric Analysis

In this study, we have studied the importance of gold to Indians and also the factors behind the demand for gold. We used a multiple regression method to estimate gold prices using lagged gold price, expected inflation, interest rate, import demand for gold, exchange rate, stock market performance and qualitative variables such as removal of import restrictions on gold. The results are as expected and the model is able to explain the movement of gold prices. The movement of the gold prices is affected to a
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large extent by lagged prices of gold as it is perceived to be an investment. Further close, substitutes like silver also impacts the price of gold. The results also indicate that stocks do not seem to be perceived as an alternative to gold. The reason for holding gold is to a large extent a guided by individual sentiment. Besides, the equity culture in India is not as developed as in some other parts of the world. Gold has not lost its prime importance as an hedge against loss of wealth in times of crises. Author : Ganesh Mani Srivyal Vuyyuri References: Literature review in Google scholar. Name of report is Gold Pricing in India: An Econometric Analysis.

Commodities and Equities: A Market of One?

Amidst sharp rises in commodity prices and in commodity investing, many commentators have wondered whether commodities nowadays move in sync with traditional financial assets. We provide evidence that challenges this idea. Using dynamic correlation and recursive co integration techniques, we find that the relation between the returns on investable commodity and equity indices has not changed significantly in the last fifteen years. We also find no evidence of an increase in co movement during periods of extreme returns.

Author: Bahattin Buyuksahin Michael S. Haigh Michel A. Robe References :

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Literature review in Google scholar. Name of report is Commodities and Equities: A Market of One?

Price Discovery and Asymmetric Volatility Spillovers in Indian Spot - Futures Gold Markets
The primary objective of Indian commodity market is to build value for the traders by providing a mechanism to protect their business from adverse price change. Traders or exporters can hedge their price risk and improve their competitiveness by making use of futures market through price discovery mechanism. Price discovery is the process by which markets attempt to reach equilibrium price. Price discovery is a major function of commodity futures market. The essence of the price discovery function hinges on whether new information is reected rst in changes of future prices or changes of spot prices. The present study assumes signicance in the sense that it enables to determine which market is more efcient in processing and reecting of new information. Besides, the study of volatility interdependence provides useful insights into how information is transmitted and dis seminated between futures and spot market. In arbitrage free economy, volatility of prices is directly related to the ow of information. If futures market increase the ow of information, volatility in the underlying spot market will rise. This study attempts to examine the price discovery process and volatility spillovers in Gold futures and spot markets of National Commodity Derivatives Exchange (NCDEX) by employing Johansens. Author: P. Srinivasan P. Ibrahim

References: Literature review in Google scholar. Name of report is Price Discovery and Asymmetric Volatility Spillovers in Indian Spot - Futures Gold Markets.

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 Vector Error Correction Model (VECM) and the Bivariate ECM-EGARCH(1,1) model.
The empirical result conrms that the spot market of Gold plays a dominant role and serves as effective price discovery vehicle. Besides the study results show that the spillovers of certain information take place from spot market to futures market and the spot market of gold have the capability to expose the all new information through the channel of its new innovation. Moreover, the study validates that the gold futures market of NCDEX found very intricate to incorporate the information in its prices. This clearly reveals that the futures market of gold is not yet matured and efcient when information gets disseminated .To conclude, the gold spot market is more informationally efcient than the futures market. The study results have practical implications for investors and market participants who wish to hedge their risk against the adverse price movements. Investors may use the spot market price, which tends to discover new information more rapidly than futures prices, to adopt more effective hedging strategies. Moreover, a better understanding of the interdependence of these markets would be useful for those policy makers who coordinate the stability of nancial markets.

References: Literature review in Google scholar. Name of report is Vector Error Correction Model (VECM) and the Bivariate ECM-EGARCH(1,1) model.

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