Risk and Return in Indian Commodity Futures Markets

Abstract

Using the modified Sharpe-Lintner capital asset pricing model, this study examines the existence of the systematic risk in the Indian commodity futures markets over the period January 2004 to December 2014. The empirical results reveal that there exists a positive systematic risk on the Multi Commodity Exchange (MCX) in the case of Certified Emission Reduction, CFI (Carbon Credits), Platinum, Rubber, and Tin and on the National Commodity and Derivatives Exchange (NCDEX) only in the case Copper, Furnace oil, Mentha Oil, Silver and Zinc futures contracts and in the rest of all other commodity futures contracts there is no systematic risk. On the whole, eight out of sixty five commodities positively significant, this implies that Indian commodity futures should be useful in diversifying, or reducing the return variability for a portfolio of stocks.