An analysis of time-varying commodity market price discovery

Paresh Kumar Narayan, Susan Sunila Sharma

Research output: Contribution to journalArticleResearchpeer-review

15 Citations (Scopus)


We propose a model of time-varying price discovery based on a rolling-window error correction framework. We show that price discovery in nine commodities is dominated by the spot market, while, in only six commodities, price discovery is dominated by the futures market. Our findings, therefore, challenge the well-established view in commodity markets that it is the futures market which dominates the price discovery process. We also show the economic significance of price discovery through a portfolio construction and hedging strategy.

Original languageEnglish
Pages (from-to)122-133
Number of pages12
JournalInternational Review of Financial Analysis
Publication statusPublished - May 2018
Externally publishedYes


  • Error correction model
  • Price discovery
  • Spot and futures markets
  • Time-varying

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