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Economic Benefits of Futures
This article examines the economic benefits of futures. Theoretically, futures are expected to aid price discovery and risk mitigation. But empirical analysis shows that speculators drive the markets and, by virtue of their domination, abduct the price discovery process in certain commodities. The deceptive price discovery leads to suboptimal forecast of future prices. So futures markets fail to offer an effective hedge against price risk. In addition, the current public-private partnership regulation is a deterrent to the sustainable growth of futures markets.
A version of this paper was presented at the Silver Jubilee Celebrations Conference on "The State, the Market and the Agripreneurs" organised by the Indira Gandhi Institute of Development Research, Mumbai during 3- 5 April 2013.
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