Speed of price adjustment toward market efficiency of Indian agricultural commodity market: a market microstructure analysis of market quality

Abstract

Purpose

This study examines the semi-strong market efficiency of the Indian agricultural commodity market in light of market reforms and policies. This study investigates whether the market reforms have boosted the speed of price adjustment and influenced the market quality.

Design/methodology/approach

The study used the daily data of nine agricultural commodities. To precisely capture the effects of market microstructure changes, this study split the whole data into pre- and post-ban and pre- and post-reform eras. To ascertain the velocity of price adjustment, the authors used the ARMA (1,1) model, and the ADD VRatio was employed to identify the price movement on a specific day.

Findings

This study found that full incorporation of information happens sometimes. The authors noticed no gradual progress in the quickness of price adjustment. Since both methods suggested the same result for the period, the authors confirm that market microstructure changes do not enhance market quality.

Research limitations/implications

This research has implications for academicians, policymakers and market players.

Originality/value

The paper has twofold novelty. First, this is a contemporary topic, and very few studies have been done in the Indian agriculture context. Second, the study has implications for policymakers and government because it highlights the effects of structural changes on market quality and market efficiency.

Citation

Pullaykkodi, S. and Acharya, R.H. (2023), "Speed of price adjustment toward market efficiency of Indian agricultural commodity market: a market microstructure analysis of market quality", Journal of Agribusiness in Developing and Emerging Economies, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JADEE-01-2023-0017