Ponte Academic Journal Aug 2017, Volume 73, Issue 8 |
PRICE DISCOVERY IN THE SOUTH AFRICAN WHITE AND YELLOW MAIZE FUTURES MARKET Author(s): Brian Muroyiwa ,Abyssinia Mushunje J. Ponte - Aug 2017 - Volume 73 - Issue 8 doi: 10.21506/j.ponte.2017.8.41 Abstract: White and Yellow maize are amongst the most liquid contracts traded on South Africa Futures Exchange. Maize is an important cereal globally but more importantly in most countries in Southern Africa where it is the staple food. South Africa is a big producer of maize as well as a major exporter. This article investigates the price discovery mechanism between spot and future prices for white and yellow maize utilising the Toda and Yamamoto VAR Granger Causality Procedure. The data that was used in the study was over the period May 1996- September 2014 and was collected from South Africa Futures Exchange website. The study confirms price discovery between cash and futures market for both white and yellow maize. The main finding of the study was that price discovery for both white and yellow maize occurs in the spot market. In light of this the study recommended that market agents on SAFEX APD should formulate efficient hedging strategies since spot prices drive futures prices. The study recommended that there is need to increase market awareness and information dissemination so that interest and participation increases in future markets. Market participants on SAFEX are advised to watch carefully spot market activity as the spot market embodies useful information about futures prices.
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