Estimation of Commodity Volatility through Bollinger Band Technique:
A Study on Cardamom and Gold Prices in India
Dr. P. Chellasamy Sreekrishnan P.
Associate Professor M.Phil. Scholar
Dept. of Commerce Dept. of Commerce
Bharathiar University Bharathiar University
Coimbatore Coimbatore
Abstract
This study estimates the commodity volatility through Bollinger Band technique. The main objective of the study is to estimate the volatility of closing price of cardamom and gold using Bollinger Band. For the study historical price of cardamom and gold were selected from 1-04-2006 to 31-03-2016. Augmented Dickey Fuller Unit Root Test is used for checking the stationary of the price series, Correlation Analysis is used…show more content… Review of Literature
Philip (2003)3 has studied the marketing system of pepper and cardamom and to analyse the major influencing factors has found out that the cardamom producers get good remuneration and the cardamom has fine demand in the market. Almost all the farmers are well aware about the domestic as well as international market conditions.
Seetha (2013)4 supports his findings through her study which analyzed the trend and growth in area, production and productivity of cardamom cultivation and to ascertain and compare the cost and return structure of small, medium and large sample farmers of cardamom cultivation. She concluded that cardamom cultivation is comparatively profitable venture for all categories of farmers in spite of the high cost of cultivation and the fluctuating nature of cardamom price structure.
The study to identify the short term and long term relationship between spot and future prices of pepper and cardamom done by Nirupama (2013)5 opinioned that there exist an impact of future price on spot…show more content… The analysis shows that there is a moderate correlation between the two commodity prices having a positive value of 0.565. This implies that these two commodities can be selected for combined investment as if the price of one change in a direction, the price of other will change in same direction but not in the same degree. So these commodities can be used against volatility.
Figure 1
The figure 1shows the volatility of cardamom price using Bollinger band charts. In this technique, the commodity price is plotted and along with it, an upper band, simple moving average and a lower band is also plotted. The chart shows that the price volatility of the cardamom is moderately high. It starts from the positive trend and then moves to negative trend at last. This movement can be shown in the below figure 2.
Figure 2 Figure 3 Figure 3 shows the price volatility of gold using the Bollinger Charts. The movement from the chart reveals that the price of the gold shows a negative trend having moderate volatility. It starts increasing at the beginning and then decreases in the last three years. This movement of price can be depicted in the figure