The inter temporal dimensions of an asset are examined through the price discovery function analysis of futures and spot price dynamics. The present study used Granger causality test and Chow test to analyze the price discovery function and the structural break of the agriculture, base metals, bullion, and energy commodities futures and spot prices during 2016-2022. The findings revealed the bidirectional causality between both the spot and future markets except gold exhibited unidirectional causality where the future market lead on the spot return is greater than contrary. Since the selected time period captures the crisis period, understanding the dynamic patterns is important for derivative valuation, hedging and asset allocation. The result of structural break revealed that among the selected commodities, only few commodities does not exhibit the structural break during the crisis period. This infer that the demand and supply for those commodities would exist in equilibrium condition and the shocks would not be transmitted to the price of commodities. The study makes recommendations for market participants to use arbitrage and hedging tactics. Additionally, it assists the regulators in assessing the steadiness of expanding commodity futures markets in India.

Highlights

• The paper analyzes the structural dynamics of commodities derivatives of spot and future market.
• The study used Granger causality test and Chow test to analyze the price discovery function and the structural break of the agriculture, base metals, bullion, and energy commodities futures and spot prices.
• Based on the results, only few commodities do not exhibit the structural break during the crisis period.